Oil rises, gold hovers around 1900

Oil holds onto gains

Crude prices held onto gains even as OPEC+ is expected to move forward with their plan to ease oil output cuts.  The global economic recovery outlook is still mostly upbeat despite the spread of the Indian COVID-19 variant.  The UK  is expected to fully reopen on June 21^st and optimism is growing for the rest of Europe to follow their lead in the coming months.

This morning oil headed higher on robust US economic data and growing sentiment that if the Iran nuclear deal is revived, it will not include an immediate removal of sanctions and that the oil market will not get quickly flooded with excess supplies.

It was a solid NY morning as weekly jobless claims continued to improve, inventories decreased more-than-expected, and capital goods orders (nondefense excluding aircraft and parts), a proxy for capital spending, surged.  An excellent round of economic data supports the argument that US growth exceptionalism story is not weakening.  The chip shortage impact on the auto sector remains a key theme that is depressing the headline durable goods headline.  The latest Experian study of auto credit market trends show demand for cars is still extremely robust.   American car demand is sky-high, whether we are talking sport utility vehicles, trucks, new or used vehicles.

Gold/Treasuries

Gold is pulling back from near four-month highs as Treasury yields rallied after a downside surprise with jobless claims, higher pricing index pressures, and as demand for safe-havens ebbed after reports President Biden will propose a USD6 trillion budget tomorrow.  Heading into a long weekend, gold prices seem poised to hover around the USD1,900 level but could see a slightly modest drop on month-end profit-taking.

Gold pared some losses after the USD62 billion seven-year Treasury sale saw strong demand, allowing today’s rally in yields to ease.  For some traders, this auction was the last big risk event until tomorrow’s PCE and Personal income/spending data.

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