Oil edges up, gold dips on stronger dollar

Oil rises but set for weekly losses as India Covid cases hit a new record

Oil prices are edging higher at the end of the week, boosted by reopening optimism in the US and Europe. However, surging Covid cases in India and new lockdown restrictions in parts of Japan are keeping any gains in check.

Investors are managing to move past the shocking Covid headlines from India and the build in crude inventories reported earlier in the week. Instead, they are taking solace in the sustained improvement in gasoline demand. Furthermore, the Covid picture in Europe appears to be taking a turn for the better as schools in France are set to reopen, marking an important step towards reopening the economy.

Despite the move high at the end of the week, oil prices are still on track for more than 2% losses across the week as a whole. Gains in oil are likely to remain capped until India and Japan, as the third and fourth-largest oil consumers turn a corner in their battle against the virus.

Gold set for weekly gains as Treasury yields remain depressed

Gold is licking its wounds after falling lower in the previous session. The precious metal slipped -0.5% lower on Thursday on the back of a stronger US dollar. Better-than-forecast US jobless claims and reports that the Biden administration is considering raising capital gains tax for wealthy individuals to 40% boosted the greenback in the previous session. As a result, the US dollar-denominated gold came under pressure.

Even so, gold is still on track to book gains across the week thanks to depressed Treasury yields. After what feels like months of the Fed insisting that any near-term rise in inflation is expected to be temporary, it finally appears that the market is buying into the dovish verse. The benchmark 10-year Treasury yield has fallen significantly over the last three weeks from a 1.74% hit in March to 1.55%. Next week’s FOMC will provide further clues.

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