Oil extends losses on European Covid concerns
Oil prices are trending lower for a third straight session amid rising concerns over the resurgence of Covid in Europe and as investors look ahead to stockpile data.
While European indices are willing to brush off rising Covid cases and a slow vaccine rollout, the oil market is less willing to do so. Fears regarding future demand are resurfacing as Europe’s Covid situation appears to deteriorate.
The American Petroleum Institute is due to release stockpile data later today. Stockpiles in the US have risen sharply over recent weeks following the deep freeze in Texas. Oil prices remain under pressure as inventories are still expected to show significant gains.
Gold in wait-and-see mode ahead of FOMC
Gold is seeing very little action on Tuesday, trading in the middle of a relatively tight range. While the precious metal is supported by falling treasury yields and the AstraZeneca vaccine situation in Europe, a rising equity market and broad risk on trade are unsupportive of the safe-haven asset.
For now, investors are likely to sit on the sidelines ahead of this week’s key risk event – tomorrow’s FOMC monetary policy meeting. The prospect of a faster US economic recovery was boosted by Biden’s USD1.9 trillion stimulus package. Inflation expectations jumped and investors started to price in an earlier move to tighten policy by the Fed. Therefore, tomorrow’s FOMC is expected to be a key factor in deciding non-yielding gold’s next move.
It is noteworthy that gold has posted slight gains in the past week. These gains are significant in that they have come against a backdrop of moves elsewhere that have sent gold lower in recent times. If the Fed disappoints markets on holding down yields, gold could face renewed downward pressure.
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