Oil eyes OPEC+, gold steady

Oil steady ahead of OPEC+

Oil prices are steady ahead of the start of the OPEC+ meeting. They’ve rebounded strongly over the last week or so as China got to grips with its latest Covid outbreak. The final months of the year may pose some challenges on the demand side for the group but, given current price levels, I can’t imagine they’ll be in any rush to change course from the current plan of increasing production by 400,000 barrels per month.

A large drawdown in inventories reported by API on Tuesday did little to lift oil prices which pulled back a little from Monday’s highs. EIA is due to publish its inventory numbers a little ahead of the OPEC+ meeting and is expected to report roughly in line with the API number.

WTI stalled earlier this week just shy of 70 dollars, which has previously been a bit of a psychological barrier for it. We could be seeing that once more, with the pullback simply being a case of profit-taking as the market assesses the full impact of Hurricane Ida on the industry.

Gold shrugs off poor ADP

Gold is treading water on Wednesday and the ADP did little to change that. The greenback eased a little following the release, which gave gold prices a small boost but we’re talking very small numbers. It goes to show how little weight the ADP report carries these days, that such a large miss can be so easily shrugged off by the markets.

That leaves gold to ease its way into the jobs report at the end of the week, when I’d expect to see a much greater response to the data, especially if we’re talking a miss of that magnitude. With gold hovering so close to the July highs around USD 1,833, the jobs data will be huge for the yellow metal, with a break above here putting it firmly back into bullish territory.

Whether it can sustain a move above there is another thing, with the Fed making clear its intentions still to taper this year. Interest rates and tapering may not be linked but one will naturally follow the other and if the data continues to be good enough to taper this year then hikes won’t be that far behind. The US economy is in a very good position still, despite some worrying trends over the last few weeks.

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