Oil heads for weekly gains, Gold weighed down by stronger USD

Oil heads for weekly gains

Oil is slipping away from the two-month high struck in the previous session. However, despite some declines today, the black gold is still set for decent gains across the week.

Signs of economic recovery across the week have helped oil bound higher. US GDP data stoked that optimism further. With the US economy firing up on all cylinders, the oil demand outlook is strengthening. Oil markets have been focused on the rising demand story, which it believes will offset any OPEC+ agreed rise in output from May.

Today concerns over rising Covid cases are raising their head again. The Covid crisis in India, the world’s third-largest importer of oil, continues to escalate and, in fact, shows no signs of abating. With daily cases continuing to reach new records day after day, the peak clearly hasn’t been reached yet. With ongoing lockdowns and threats of new variants, the dire Covid situation in India is the dominant headwind risk to oil currently.

Gold weighed down by stronger USD

Gold is edging lower on Friday and is set for mild weekly losses after three consecutive weeks of gains. Higher treasury yields and a stronger US dollar are weighing on demand for the precious metal.

US economic growth accelerated in the first three months of the year, as consumption rose thanks to government cheques to lower-income households and the gradual easing of lockdown restrictions. The data provided renewed optimism surrounding the economic recovery, lifting risk appetite and weighing on the safe-haven gold.

Markets are turning cautious on Friday, concerned about rising yields. US treasury yields rose to a two-week high of 1.68%, and while this remains some way off the 1.75% high seen mid-March, it is still enough to take the edge off the equity market pulling US futures southwards and dragging non-yielding gold lower.

Looking ahead, gold is likely to focus on the release of US inflation data for further clues. US PCE, the Fed’s preferred measure of inflation, is expected to rise by the most in the year.

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