- MarketPulse - https://www.marketpulse.com -

Crude dips on supply outlook, gold steady

Oil falls on output expectations

Crude prices softened as energy traders anticipate more output from OPEC+ and as Gulf of Mexico producers began resuming service.  A wave of disappointing economic data from the world’s two largest economies is not doing any favors for the short-term crude demand outlook.

There is good reason to be optimistic for crude demand across Europe now that 70% of adults in the EU are fully vaccinated.  Crude demand across the US will likely soften as peak driving season ends and over delay on returning to the office and resuming normal business air travel.

WTI crude will hover around the 68 dollar level until the OPEC+ meeting is concluded.  Energy traders are counting on seeing further declines with US stockpiles and for the OPEC+ group to stay the course with their gradual output increases.  Hurricane Ida might dampen demand prospects, but the disruption in US production should allow OPEC+ to restore more output.  The oil market is still in deficit and will probably stay that way for several months.

Gold

Gold prices are all over the place as investors grapple with weakening economic data globally (thank you Canada, China and the US) and potentially less stimulus from the eurozone after some hawkish ECB comments that could suggest a quicker exit from crisis mode.  Inflationary pressures are not easing and that is why global bond yields are rising, thus taking away some of the demand for bullion.

Gold traders might begin to anticipate a greater impact from the delta variant with the US consumer and possibly a less hot labor market.  Gold has been unable to recover the losses that stemmed from the June FOMC policy decision that showed policymakers saw two rate hikes by the end of 2023.  Gold should not be struggling to recapture the USD 1850 level given Fed Chair Powell’s dovish tapering message last week, softer PMI data from China, and plunging US consumer confidence.  If gold does not rally here, it could get ugly pretty quickly.  At some point, gold needs to act like an inflationary hedge, but right now pricing pressures are likely to trigger less accommodation from central banks, essentially dampening demand for bullion.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya [4]

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