Oil prices jumped 4% on Wednesday, bringing the price per barrel around the important $50 mark. With gold also gaining 1%, silver up 3%, and platinum rising 3.4% on the session, it’s clear that many investors are switching over to commodities trading following the chaos of the Brexit.
Oil on the Rise
Wednesday’s oil trading activity was inspired by a U.S. government report showing a larger-than-expected weekly drawdown in crude inventories. Crude stockpiles fell by 4.1 million barrels last week, the sixth consecutive week of declines.
This only fanned the flames started by the recent “Brexit” referendum, and the threat of an oil workers’ strike in Norway, as well as the continued economic debacle in Venezuela are also contributing to the recent rise in oil prices.
Precious Metals Climb Higher
Gold rose nearly 1% to $1328.30 per ounce, while silver and platinum saw gains of over 3%. Gold futures closed near a two-year high to start the week, and it’s no surprise that investors flocked to the relative security of previous metals following the uncertainty created by the Brexit. The pace at which silver and platinum are outpacing gold, however, is interesting.
What’s also interesting is how well stocks rebounded on Wednesday. The NASDAQ gained nearly 2%, while the S&P 500 and the DOW were up 1.7% and 1.5%, respectively. Although we continue to see commodities climb, investors are regaining their faith in the stock market.
This renewed faith may be stemming from a realization within the market that Brexit concerns were overblown. While the decision to leave the EU will not be without economic consequences, there is still a lot of figuring out to do for the UK. Proponents of remaining are urging the country to maintain the “single market” of the European Union, while Brexit leaders are already starting to scale back their promises.
The immediate change in tone, as well as the lack of a coherent plan from the British government as to how to actually execute the withdrawal are leading investors to realize that there is still plenty of time before anything gets finalized.
As for now, the results of the Brexit remain unclear, meaning we should still see volatility in both stocks and commodities, especially those with assets directly involved in Britain or Europe. Oil, on the other hand, is being driven by a handful of other factors and could continue to climb depending on what happens with U.S. stockpiles, as well as the situations in Norway and Venezuela.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>