Oil rallies, gold awaits NFP

Oil

Crude prices are surging on a weaker dollar and as remnants of what was once Hurricane Ida led to flooding in the Northeast.  Growth forecasts are getting slashed and that is leading to expected delays of any taper signals from the Fed, which is the primary reason for dollar weakness.    Kinder Morgan noted that their New Jersey terminals had flooding but are still operating.  The Ida impact in the South has almost two-thirds of New Orleans gas stations shut, with over one-third without fuel.

Refiners are struggling getting power back, but optimism is that things should mostly be back to normal in a few weeks.  Crude prices seem to have only one-way to go due to the short-term impact from Ida and when you factor in the oil market will remain in deficit as OPEC+ steadily eases production curbs.

WTI crude is brushing up against the 50-day SMA, which suggests further bullish momentum could target the July highs if prices close above the USD 70.25 level.

Gold eyes Nonfarm Payrolls

Gold prices are completely locked in on the August nonfarm payroll report. Despite a relatively strong bid for risky assets this week, gold has underperformed, which makes Friday’s jobs release a strong catalyst to support a move to either USD 1850 or USD 1750.

Gold prices pared some losses after Morgan Stanley noted they see a concentrated slowdown in the third quarter, slashing their growth forecast from 6.5% to 2.9%.  Morgan Stanley’s economist wrote, “Growth in the U.S. economy is coming off a torrid pace in the first half of the year as stimulus spending and a reopening-fueled burst of activity cools.”

If payrolls disappoint, when you factor out a surge in government hiring for teachers, a greater slowdown could push taper talk into next year, which could be great for bullion.

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