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Oil rises, gold slumps

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Energy

Crude prices were supported after rising geopolitical tensions kept the short-term production somewhat vulnerable and as Western Europe starts to see COVID cases declining.  Energy markets are trying to figure out how talks between Washington and Tehran unfold after Iran’s nuclear facility was attacked.  Tehran’s enrichment program was the big chip at the negotiating table and if that capability was damaged, that could hurt their leverage.  The head of Iran’s Atomic Energy Organization stated uranium enrichment at the Natanz facility continues.

Saudi Aramco facilities were targeted by Yemen’s Houthis with 17 drones and two ballistic missiles.  Tensions remain elevated in the region but have yet to yield any disruptions to output.

If the crude demand outlook continues to look strong in the US and improving across Europe, oil prices could resume a steady climb higher.

Gold

Rising Treasury yields drove demand away from gold.  The unfolding inflation debate will heat up and a steady rise in Treasury yields could prove difficult for the gold market.  Gold traders are waiting to see if the 1.75% cap put in place for the 10-year Treasury can hold.  If Western Europe continues to make progress in the fight against COVID, the reopening trade should keep the dollar vulnerable and support gold prices.   Inflation risks are growing and more noticeably with emerging markets and that should keep central bank buying of gold strong going forward.

Gold volatility is slowing down and while the bullish case has some holes in it, the outlook should still be for much higher prices later this year.  Gold has massive support at the USD1700 level and if this holds over the next couple of days, prices should grind higher towards USD1800 over the coming weeks.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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