Oil consolidates, gold higher

Oil looking for direction

Crude prices are struggling for direction as short-term COVID pressures are countered by a much weaker US dollar. There were no real fireworks from the FOMC minutes and no new emerging drivers for oil prices, leaving crude directionless.

Some risks are brewing in the fight against COVID; China is facing a supply shortage for their vaccines, the US school-reopening is in jeopardy among virus spread with youth sports, and vaccine efficacy could be at risk as some European countries contemplate spreading out the time between first and second vaccine doses.

Tightening supplies could continue despite some of the short-term headwinds to the demand outlook.  WTI crude continues to consolidate but could start to push higher if dollar weakness accelerates.

Powell/Gold

Gold prices are breaking out as Treasury yields and the dollar continue to slide on further acceptance that the Federal Reserve is nowhere near ready to discuss exit strategies.  The doves are in control and today’s cautious comments from Fed Chair Jerome Powell delivered another reiteration of their ultra-accommodative stance.

Powell’s comments are a reminder that no matter what the data says over the next couple of months, the economic recovery will be incomplete and uneven and likely warrant no change in policy for a long time.  He added that now is not the time to pare back support, highlighting that the unemployment rate among the bottom quartile is 20%.  The Fed’s job won’t be over until 9-10 million Americans are no longer out of work.  Substantial progress will require a handful of months of inflation running above the Fed’s target and for the majority of the remaining 8-million lost jobs during the pandemic to return.

Gold momentum is building and could trigger a rally above the USD1,800 level if the Treasury yields across the curve remain heavy.

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.