Oil eases off highs
Oil prices are pulling back a little at the end of the week after coming within a whisker of summer highs on Wednesday. We’re clearly seeing some profit-taking kicking in on approach to those highs, with the restarting of operations in the Gulf of Mexico and the dollar rally further backing the move.
Any correction in price could see some support arrive around USD 70 in WTI, where it finally broke back above earlier this week. There still appears plenty of momentum in the rally which could keep dip buyers interested. There’s also a couple more months of Hurricane season so further disruption in the Gulf is likely.
Gold stable after plunge
Gold took a pummeling on Thursday. A break of key support around USD 1,780 followed by stronger US retail sales and manufacturing data was a hammer blow for the yellow metal which rapidly fell below USD 1,750 before paring some of those losses. It’s making minor gains today but struggling to even maintain them.
It seems traders view the risks next week as being tilted to the downside for gold and have started pricing it in early. It’s not an outrageous assumption given the commentary we had from policymakers ahead of the blackout period, especially when combined with yesterday’s data, but it may be a little premature. Next week should clear up some of the confusion as the Fed commentary we’ve had recently doesn’t seem to match the mood in the markets.
I imagine the Fed will want to remain committed to its desire to taper later this year but if they do, I expect there’ll be plenty of dovish caveats designed to keep the markets on board. And this may spare gold in the short term as we wait to see if the downside risks materialise.
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