Oil dips, gold pares gains

Attention turns to OPEC+ meeting

Oil prices are lower at the start of the week as traders eye the next OPEC+ meeting on Wednesday. With the previous agreement having expired as the group has theoretically unwound all of the pandemic production cuts, attention will now shift to how OPEC+ plans to actually hit those targets and whether any further increases will be announced going forward.

Not many have the capacity to do that but some potentially do and President Biden will be hoping his Middle East trip will have helped secure some form of boost – or at least appear that way – that could prove important heading into the midterms in a few months. ​ One US official last week sounded optimistic although reports suggest no increase is likely even if it will be discussed.

Gold recovery may have legs

Gold is a little lower, paring gains after rebounding strongly in the second half of last week. The Fed’s data-dependent shift was the latest catalyst for a decline in US yields as traders pared back their expectations for rate hikes going forward. The 10-year is now well off its highs from a couple of weeks ago which is triggering the latest relief rally in the yellow metal.

I’m not entirely convinced by the recent rebound we’re seeing throughout the markets as inflation is still extremely high, central banks are far from done with their tightening and the recession narrative just doesn’t cut it. Gold is potentially the outlier here as it could benefit from safe-haven flows if countries are thrown into recession and central banks are left to choose between hitting inflation targets or the economy.

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