Oil rebounds, gold shines

 Oil prices rise on Saudi Arabia increase

Crude prices pared earlier gains after constant posturing by the Biden administration that shows they are getting closer to tapping the Strategic Petroleum Reserve.  In the morning, Energy Secretary Granholm noted that Biden wants to see added supply of oil and that an announcement could be made this week.  In the afternoon, White House Principal Deputy Secretary noted that the White House continues to monitor energy prices.

Earlier oil prices were boosted after Saudi Arabia delivered a significant increase to Arab light grade of crude for Asian customers.  For Saudi Arabia to deliver such an increase, the demand outlook must be improving, somewhat contradicting the uncertainty to the outlook they touted last week.

It is hard to be overly bullish crude prices in the short-term until after the Biden administration intervenes. If the administration taps the SPR, WTI crude should find support around the USD 76.63 area.

WTI crude got an added boost after the DOE reported the SPR declined by 3.14 million bbl last week, the largest drop since July 2017.

Gold

Gold is breaking out as investors scramble for inflation hedges. Fed and BOE rate hike expectations remain influx as investors await the next round of inflation data. Gold is having a good start to the week after President Biden finally got a big win with infrastructure spending and as real yields in the UK fall to record lows. The UK 10-year yield fell to a fresh record low and the 30-year dropped below 1% for the first time since the summer.

If this week’s inflation data does not disrupt the gold rally, bullish momentum could eye the USD 1900 level.

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