Oil weaker on gasoline build, gold steady

Oil

Crude prices extended losses after gasoline stockpiles unexpectedly rose, marking the end of peak summer driving season.  The weekly EIA report was a mixed bag as the headline draw of 3.2 million barrels was larger than expected, gasoline demand weakened, jet fuel improved slightly, and production rose to 11.4 million bpd.

There are still too many question marks over the crude demand outlook over the next few months and that will weigh on crude prices.   The return to the office no longer seems like a certainty and delays in approving vaccines for younger children will likely mean inconsistent demand as the school year starts.

After the release of the Fed’s minutes, risk aversion prevailed and oil prices returned back to session lows.

Gold edges higher after FOMC minutes

Gold is having a nice run, given that demand for safe-havens remains strong on both global growth concerns and peak earnings.  With Wall Street widely expecting tapering but not necessarily raising rates anytime soon, the harsh reality that Treasury yields will not be skyrocketing has allowed investors to scale back into the precious metal.

Gold got a small boost from a mixed FOMC minutes that showed diverging views over the mechanics of removing stimulus and a reminder that interest rate hike timing should not be linked to a tapering decision.

Gold has a barrier at the USD 1,800 level, but that might not last much longer.  A taper announcement at Jackson Hole is clearly off the table and any risks to the outlook from the delta variant will likely mean September is less likely.

The stimulus trade is not going away just yet for gold and that should be good news if price action breaks above the USD 1,800 level this week.  If bullish momentum continues for bullion, the USD 1,850 level should be the next key resistance level.

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