Oil retreats, gold eyes US inflation

Oil slips as fuel demand disappoints

Oil prices are edging lower as the start of the US summer driving season has failed to live up to the hype. EIA stockpile data in the US, the world’s largest oil consumer, revealed a softer-than-expected fuel demand in the US at the start of the key summer period.

Oil stockpiles fell for an 11th straight week, which is an encouraging sign. However, fuel inventories rose sharply owing to weak consumer demand.

The oil market has been hopeful of a strong US driving season to boost demand. So far, the data suggests otherwise. Even so, traffic levels are rising, and the vaccine programme continues at a rapid pace, which bodes well for the outlook.

The uptrend for oil remains intact, but the data has served to rein the bulls in and remind us that the road to recovery isn’t linear.

Gold eyes CPI for next move

Gold prices are falling lower for a third straight session after briefly pushing over USD1900 at the start of the week. The precious metal trades around its weekly low as nerves creep in ahead of the ECB rate decision and US CPI data. These key events will shed some light on the pace of the global economic recovery and central bank policymaker’s stance towards stimulus.

A stronger-than-forecast rise in CPI could boost bets that the Fed will rein in support sooner, which could be negative for non-yielding gold.

All eyes are now on the ECB. The central bank is not expected to move on interest rates, and the PEPP is expected to remain at EUR 1.85 trillion.

Just a fortnight ago, ECB President Christine Lagarde said it was too early to talk tapering support. The markets will be keen to see signs that the ECB is willing to keep the stimulus taps turned on.

Technically the picture for gold is bearish. Having breached support at USD1880, sellers could look to target USD1856, the 4 June low.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.
Sophie Griffiths

Latest posts by Sophie Griffiths (see all)