Gold melts while oil surges

Gold melts lower into bear-market territory

Fed Chair Powell’s dismissal of the bond market turmoil played havoc with the markets. Treasury yields spiked to a fresh yearly high and the US dollar surged to a three-month top, while gold tumbled to a multi-month low below USD1700.

The precious metal is teetering on the edge of bear-market territory after finding itself transitioning from a favoured reflation bet to its worst first-quarterly performance in almost 40 years. As higher yields grab the attention of the markets, non-yielding gold can’t compete. Add into the picture optimism from the covid vaccine rollout and safe havens are also under the cosh.

Under USD1700, gold looks vulnerable and a deeper sell-off towards USD1685 support and then USD1665 could be on the cards.

Oil surges to 14-month high post OPEC+

Boosted by OPEC’s decision to stay pat on oil supply increases until next month, oil prices have surged more than 2%, hitting the highest level in almost 14 years. Earlier in the week, expectations had been for the OPEC+ group to increase supply by as much as 1.5 million barrels, so yesterday’s decision is a welcome relief for the bulls.

The group agreed to increase supply in April, which appears to be a win-win solution. With vaccine rollout programmes accelerating, the reopening of global economies is expected to pick up substantially over the coming month, which could put a solid floor under the price of oil ahead of any increase in supply next month.

Attention will now shift to the US Labour Department’s closely-watched non-farm payrolls report (15:30 GMT). The key question here is whether the NFP report will help calm the markets or fuel inflation expectations? Powell insists the US economy still has a long way to go to reach the Fed’s full employment goal. However, an upbeat number could raise questions over this statement and risk sending bond yields higher and stocks lower still. The street consensus for the NFP stands at 182 thousand.

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