Oil surge continues, safe haven gold

Oil surge continues as OPEC+ plays the waiting game

Oil prices are continuing to tear higher after OPEC+ passed up the opportunity to take some heat out of the market.

The group is clearly concerned about the potential hit to demand in the coming months if Covid wreaks havoc once more and restrictions are reimposed and therefore opted to maintain planned increases of 400,000 barrels per day, each month for now.

With Saudi Aramco highlighting the increase in demand as a result of the energy crisis, amounting to around 500,000 barrels per day, prices were only going to go one way. And now it’s a question of what the group is willing to tolerate, $90, $100?

We can’t rely on US shale to fill the void, it seems, with the industry focused on debt reduction and returning cash to shareholders.

Gold the new (old) safe haven?

Gold performed well at the start of the week, in what appeared a blast from the past, with the yellow metals safe haven qualities being favoured.

While the dollar has typically performed well in these circumstances, which has actually been a drag on gold, it would appear investors are having a change of heart.

Perhaps the threat of rising inflation is forcing a rethink, with central banks seemingly intent on removing stimulus measures despite recoveries slowing and economic risks rising. Or is it the debt ceiling that’s driving the change of heart and the (highly unlikely) prospect of default weighing on the dollars safe haven qualities?

With risk appetite improving today, gold quickly gave back Monday’s gains to trade back around $1,760. It will be interesting to see whether gold remains a safe haven favourite once the debt ceiling is inevitably raised.

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