Oil softens, gold steadies

Oil dips lower

Crude prices remain volatile as energy traders grapple with recession fears and a tight oil market that may see the G7 unveil price caps on Russian crude. Oil might have confusing reactions to economic data until Wall Street agrees upon when the peak is in place for Treasury yields. ​ Stronger economic data would normally be a positive for the crude demand outlook, but right now the reaction might be negative for oil as traders will view strong readings as a greenlight for the Fed to tighten even more aggressively to fight inflation. ​

Oil is slightly lower as some traders begin to price in a significant global growth slowdown for next year and as the risks of more supply from Iran remain on the table.

Adding to the downward pressure on oil is the expected resumption of Iran nuclear deal talks. Iran’s Foreign Minister Hossein Amirabdollahian stated “we are prepared to resume talks in the coming days.” EU Chief diplomat Burrell added, “We are expected to resume talks in the coming days and break the impasse.”

Oil has been unfazed most of the year with the prospects of Iranian crude returning to the market because the oil demand outlook was robust. With global economic activity deteriorating as inflation continues to run wild, crude demand destruction concerns won’t be easing up anytime soon. ​

Gold

Gold prices are steadying as investors debate whether the peak in yields is in place. Gold’s early rally did not last after better-than-expected durable goods data supported the argument that the Fed may have to tighten policy even more aggressively.

Much attention was given to the news that the G-7 would announce a ban on new Russian gold. ​ Western countries have already been limiting their transactions with Russia, so this ban would merely confirm what most were already doing.

Gold is acting like a surfer and currently paddling through a wave of rising Treasury yields. Gold will ‘pop up’ once Wall Street is convinced they nailed down how high the Fed will take rates and then it can rally on global recession fears.

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