Gold treading water, oil rally continues

Gold caught between rising yields and weaker USD

The yellow metal is treading water as investors weigh up rising treasury yields against a weaker US dollar and risk-off sentiment in the equities market. Gold is consolidating losses from yesterday, when a rebound in Treasury yields triggered a correction in the precious metal. Further efforts by the Biden administration to progress the USD2.5 trillion infrastructure stimulus plan lifted yields. Higher yields are likely to remain a weight on gold. With a light US economic calendar, investors will be looking towards updates on Biden’s infrastructure plan and sentiment surrounding earnings, which are starting to ramp up for fresh impetus.

Oil extends rally ahead of API data

Oil prices are on the rise again on Tuesday. After rallying more than 6% across the previous week, oil prices are already up an additional 1.4% so far this week as signs of the global recovery appear to be playing out in the commodity space, particularly through oil and base metals.

The weaker greenback is helping to underpin the commodity, in addition to rising expectations that US crude inventories will decline again this week, as the world’s largest consumer of oil reopens its economy.

However, risks remain. With the resurgence of Covid in India – the world’s third-largest importer of oil – tighter lockdown restrictions could dent the near-term demand outlook for oil.

On the data front, the UK jobs report was a mixed bag. The headline unemployment number unexpectedly dipped lower to 4.9% in the three months to February, down from 5% in January and defying expectations of a move higher to 5.1%. However, the unemployment rate decline is more likely due to a rise in the number of people who had exited the job market altogether because the inactivity rate rose by 0.2%.

Furthermore, the more timely payroll data fell back slightly in March. Yet delving further into the numbers, a more encouraging picture is emerging as payrolls outside the hard-hit consumer service sector are starting to turn a corner. Furthermore, job vacancies were also on the rise in March, so it was certainly not an all doom and gloom report, but there is still plenty of room for improvement.

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