Oil steadies, gold rebounds despite hawkish Fed

Oil steadies but further volatility may be in store

Oil prices are steady at the end of the week, the rest of which has been anything but. There’s been a lot to factor in recently from OPEC+ (Saudi) output cuts to higher interest rate expectations, deteriorating economic prospects, and rate cuts in China.

In all of that, the price has held in its lower 2023 range – roughly $70-$80 in Brent – but it did test the lower end of this earlier in the week. Going forward, the focus will likely remain on interest rates and just how much they will threaten economies into year-end and perhaps what else China has up its sleeve to support the economy.

There was a brief surge in the price of natural gas on Thursday, apparently triggered by plans in the Netherlands to close a field. It may be that this was a knee-jerk reaction to what shouldn’t be big news but it perhaps highlights how sensitive the market remains to outages given it triggered a 30% rally at one stage.

Gold rebounds strongly despite Fed rate cuts being priced out this year

The slide in the dollar in recent days, alongside US yields since the Fed pause on Wednesday, has given gold a boost going into the end of the week. Since breaking below the lower end of its recent trading range – roughly between $1,940 and $1,980 – the yellow metal has rebounded strongly and now finds itself not far from the upper end of the range.

With the Fed far from convinced that its tightening cycle is over – quite the opposite in fact, the median estimate is that there’ll be two more hikes this year and one policymaker thinks four – and markets having now priced out those rate cuts this year, it may take something significant to sway gold one way or another. No further hikes look much more likely after the pause, regardless of the dot plot, but it will require convincing data over the coming weeks.

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