Nothing stopping oil, gold lower

Oil extends gains

Crude prices bought a one-way ticket higher as a global energy crisis provided an unexpected surge in demand that is swinging the oil market further into deficit.  Brent crude did not waste much time with the USD 80 level and the profit-taking that has occurred following each surge has been somewhat limited.  Even a stronger dollar is not disrupting the move in crude prices.

This week, energy traders could see USD 85 oil if US stockpiles start to decline again.  Analysts have a mixed view so this afternoon’s weekly API crude oil inventory release could trigger a big move.  Energy traders are ready to lock in profits, so a small dip could happen if stockpiles deliver a decent-sized build, which would likely be attributed to higher production, robust imports, and as refiners mostly rebound from the peak of hurricane season.

Gold

Gold prices got hit with a double dose of bearish drivers as turnaround Tuesday dampens demand for safe-havens and as Treasury yields rise, ending the dollar’s three-day slide.  The upcoming nonfarm payroll report could be a gamechanger for gold prices, so prices will likely consolidate between the USD 1,745 and USD 1,775 range.  With China closed for golden week, gold will likely see limited safe-haven flows from Asia despite the persisting uncertainty with Evergrande.

After Friday, Wall Street could have a unanimous view over Fed tapering that could lead to the last major move lower.  Once tapering is fully priced in, financial markets will grow fixated over the risks to the 2022 outlook and that will be the greenlight for many investors to return to bullion.

Complicating the demand for bullion has been crypto resilience that is stealing away some institutional flows that would normally go gold’s way.  Gold’s short-term outlook remains bearish, but the medium-term should become bullish.

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