Oil rises, gold steady

Oil gains ground after Iran election

Crude prices edged lower after Iran’s presidential election yielded no surprises and the sixth round of talks failed to revive the nuclear deal.  Iran’s new president is a 60-year-old hard-liner judge, who was sanctioned a couple years ago by the Trump administration for being backed by Iranian Supreme Leader Ali Khamenei.  It seems the Biden administration is setting a hard deadline of six weeks, which is just before Raisi will be inaugurated in August.  Talks between Iran and world powers have not progressed enough to have the US in actual attendance. The longer talks drag, the further Iranian sanction relief is delayed.  Iranian output is expected to increase in the third quarter, but if no breakthroughs are made over the next few weeks, that could be in jeopardy.

Summer travel demand has been intense for airlines; as a matter of fact, it has been too strong for American Airlines that they need to reduce some flights to avoid potential strains.  It might end up only being 1% of flights that get removed in the first half of July, but it shows how difficult companies will struggle to ramp up operations.

The President-elect is making the media rounds and any hardline comments will be taken with a grain of salt.  The roaring crude demand outlook should help WTI crude defend the USD70 oil level.

Gold

Gold prices are attempting to stabilize after last week’s bloodbath.  Wall Street is starting to expect a lot less stimulus getting pumped into the economy and that has been kryptonite for gold.  The Fed’s upgraded forecasts were mostly their playing catchup with their forecasts and the surge with yields at the shorter end of the curve was warranted.

Gold will eventually return to becoming both an inflation hedge and safe-haven asset, but for now it trades solely as a risky asset.  Something will break gold’s way over the short-term, either stocks start to feel the rumblings of a sooner-than-expected taper tantrum or the dollar’s rebound is temporary.

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