Oil stumbles, gold edges lower

Oil eyes Iran nuclear talks

After 18 months of negotiations, progress has been made in reviving the Iran nuclear deal. ​ We’ve been here before and have seen talks fall apart. ​ What is a little different this time is that it seems the Iranians are willing to discuss the terms. If the Iran nuclear deal is revived, that could send oil prices down to the low $80s. ​

Crude prices are declining over fears China’s growth could slow much more and on improving odds that the Iranian crude could flood the market as negotiators near a potential revival of the Iran nuclear deal. The crude demand outlook is taking a big hit after a wrath of disappointing Chinese economic activity readings and as Germany struggles. ​ Oil won’t catch a bid here as China’s recovery is weakening and Germany continues to underperform in the EU. ​

Gold

Gold prices are struggling as global bond yields surge across the board. ​ Treasury yields jumped after the latest housing starts data disappointed. ​ The housing market is cooling as the starts data falls to a new 17-month low, which will be well received by the Fed. The Fed can continue with its aggressive rate tightening schedule as it is working.

The economic data has been mixed today as housing starts dropped more than expected and manufacturing activity posted a solid rebound as vehicle production returned. All eyes will be on the Fed’s Minutes which will likely confirm we need to see the next labor and inflation data before making the call that the Fed can go at a slower pace of tightening. ​ Gold will probably remain rangebound until it is clear which way market expectations lean towards, either a half-point increase or another 75-basis point raise. ​