Oil reverses losses after surprise EIA draw
Oil came under some pressure early in the day as it continued to struggle around its recent highs, but those losses were short-lived as EIA reported a small drawdown against expectations of a 2.1 million barrel build. This came after API reported a 3.294 million barrel build on Tuesday, so the drawdown very much came against expectations, hence the big rebound.
Of course, this is also a market that is fundamentally bullish so we’re likely to see plenty of dip-buying appetite in moments like these. While there may be headlines here and there that take the heat out of the markets, whether that be weather-related or warnings from world leaders directed at OPEC+, only an increase in output or an easing of energy fears will lead to a substantial pullback. OPEC+ struggling to hit current output targets may not bode well on the first point.
Gold edges higher as USD falls further
Gold is making decent gains again on Wednesday as the dollar continues to come under a little pressure. The greenback has slipped back to its lowest level in three weeks as traders continue to price in tighter monetary policy from central banks around the globe. So much talk in recent months has been around Fed tapering but the focus has been shifting, with the BoE seemingly right at the front in terms of rate hike intentions.
The result is that gold has found itself well supported in a tightening environment when stock markets are performing surprisingly well. Whether that will be sustained in the near term depends on the fate of the dollar, which may have a little further to fall yet. As it approaches 93 and gold pushes USD 1,800, the conversation may get a lot more interesting.
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