Oil looks for direction, gold under pressure

Oil flat as OPEC+ to gently hike supply

Oil is consolidating after strong gains in the previous session. Oil prices rallied higher on Tuesday and remain supported as upbeat demand outlook forecasts overshadow the ongoing Covid crisis in India and a larger-than-expected build in US crude stockpiles.

OPEC’s decision to stick with a phased easing of production restrictions is being viewed in an optimistic light. The easing of output restrictions will take place across May to July, amid optimistic forecasts for recovery in global demand, despite Covid cases soaring in important developing markets such as India and Brazil. The market is seeing this decision in a glass-half-full light. Investors are focusing on the encouraging outlook that backs the decision, rather than the increase of oil set to flood back into the market.

The OPEC + group decided to sack off today’s OPEC meeting, sticking to the broadly agreed plans from the 1 April meeting.

Expectations of surging demand are keeping the price of oil underpinned. With international travel expected to kick off in under a month, the jet-sized hole in demand could recover rapidly.

Gold under pressure from rising yields

Gold is extending losses for a second straight session on the back of rising yields and a stronger US dollar.

On Tuesday, both yields and the greenback pushed higher after better-than-expected US consumer confidence, which surged to a 14-month high in April as more vaccinations and additional fiscal stimulus lifted morale. Consumers are seeing light at the end of the tunnel, laying the groundwork for a strong consumer-based economic recovery.

Both yields and the US dollar are on the rise again today ahead of the FOMC. The Fed is expected to remain patient, even as the outlook for the US economy improves. Any hints of a more hawkish Fed could send gold back below USD1750.

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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.