Oil prices head higher
Crude prices are rising for a trifecta of reasons: production from the Gulf of Mexico struggles to return, concerns Libyan protests may disrupt oil output, and Iran nuclear talks are nowhere near ready to resume. Despite the modest risk-off vibe on Wall Street, oil is not going lower as both supply and demand fundamentals support stable if not higher prices. WTI crude may find tentative resistance at the USD 71 level, but that might not prove to be too hard of a barrier with this market remaining heavily in deficit.
Gold remains in the danger zone as the dollar continues to rally on safe-haven flows. Gold pared losses after both tremendous demand for a 10-year Treasury auction sent yields lower and no hawkish surprises came from NY Fed President Williams.
If gold stays below the USD 1800 level, bearish momentum could easily send prices initially to USD 1750. Gold needs both Wall Street to believe we have seen the high in Treasury yields for the year and for some institutional investors to lose confidence in cryptocurrencies. Bullion traders are hesitant to buy the dip right now and may wait to see signs from central banks that further stimulus is likely to address the recent deceleration.
The delta wave may be peaking, but the Fed is likely to remain in clearly in wait-and-see mode over the next couple of months to see how well the economy is performing. Fed member Williams made some dovish comments that support the idea that the Fed will not taper before December at the earliest. Williams anticipates that it could be appropriate to start reducing the pace of asset purchases this year. His growth outlook for 2021 is around 6% and he sees inflation slowing to about 2% next year.
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