Oil rallies on EU optimism, gold drops on surging yields

Oil prices continue to climb

Crude prices are rising on global reopening momentum, Moderna’s announcement to almost double vaccine capacity for the next year, and as Germany administered a record 1.1 million COVID vaccine doses.  Despite concerns over the Indian variant, parts of Europe are also heading towards reopening and could be poised to have a somewhat normal summer.  The crude demand outlook is getting a big boost from Europe and that should overcome some of the risks across India and many emerging markets.

WTI crude’s rally was getting close to the ceiling put in place in March and quickly pared gains after a surge in Treasury yields triggered a slight bid for the dollar.  The outlook is still much higher for WTI crude, but a break of the USD68 level will be difficult to come by until the COVID situation in India improves.

Gold/Copper

The commodity supercycle has yet to help excite gold bulls, but it has been good to copper.  Copper prices breached the USD10,000 level on infrastructure spending hopes, climate-friendly initiatives, and optimism that the global economic recovery will be strong and extend into next year.

Gold plunged after Treasury yields surged higher following robust earnings and improving economic data derailed the safe-haven trade and on rising bets that the Fed may be proven wrong about inflation being transitory.  Gold has massive support at the USD1,745 level and if that holds, a consolidation period will likely remain in place over the short term. Gold will eventually climb higher; it just needs to see the bond market believe that the Fed will remain stubbornly accommodative throughout the next few months of robust economic data.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. 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. Most recently 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 and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya