Oil dips over Covid, gold remains steady

Fed remains dovish

The minutes showed that Federal Reserve officials remain committed to their dovish stance, despite signs that the US economic recovery is picking up. Policymakers at the Federal Reserve believe any rise in inflation will be temporary and consider it necessary to continue supporting the economy until recovery is on firmer ground.

The Fed is sticking unwaveringly to the dovish hymn sheet, and the market could be starting to believe it. The Fed is showing little appetite to begin tapering bond purchases or raise interest rates, despite the stronger US economy.

Oil trends lower after bearish EIA report

Oil is snapping a two-day rising streak despite the broadly upbeat mood in the wider market and a weaker US dollar. A bearish weekly EIA crude oil inventory report did little to support the price, although it was far from unexpected given it largely confirmed the API data from Tuesday.

The EIA report revealed a larger-than-expected 3.5 million barrel draw in inventories. However, distillate and gasoline stocks saw a much greater rise than expected, with builds of 1.452 million and 4.044 million, respectively.

Fundamentally, fresh catalysts are few and far between. Oil markets continue to fret over rising Covid numbers in key developing markets such as Brazil and India, while parts of Europe appear to be locked down indefinitely. While Covid developments remain negative, there seems little hope of crude oil trading meaningfully back over USD60.00.

Gold’s gains capped

Gold is clinging to gains near a two-week high as it rebounds from yesterday’s pullback. The weaker US dollar, which is failing to capitalise on a move higher in treasury yields, is offering support to dollar-denominated gold. However, a combination of rising yields and a broadly upbeat mood in the financial markets is likely to keep any gains in the non-yielding safe-haven precious metal capped for now.

 

For a look at all of today’s economic events, please check out our economic calendar at                            www.marketpulse.com/economic-events/

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Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.