Oil takes pause, gold higher as dollar dips

Oil consolidates around monthly top

After strong gains across the week so far, oil bulls are pausing for breath. The price of oil is consolidating around the monthly high. It trades up over 5% across the week.

Better-than-expected stockpile data – both EIA and API – a weaker US dollar and optimism surrounding more energy demand helped oil book its strongest daily gains since late March on Wednesday. Both benchmarks for oil rose over 4%. Following such as upbeat performance, some consolidation around these levels is not so surprising.

In the previous session, both EIA and OPEC upgraded their forecasts for world oil demand growth this year. A double-whammy of upwardly-revised oil demand outlooks is pretty hard to ignore.

Even so, gains are likely to remain capped as OPEC looks set to ease production cuts from next month.

Gold capitalises on weaker US dollar ahead of retail sales

While gold failed to capitalise on the weaker US dollar yesterday, the precious metal was not going to make the same mistake today. Gold settled -0.45% lower on Wednesday, despite a 0.25% decline in the value of the US dollar. A weaker greenback often boosts demand for USD-denominated gold, making it cheaper for buyers with other currencies.

Today, despite a broad risk-on mood in the market and thanks to a weaker US dollar, gold is advancing. The precious metal has pushed over its 200 EMA on the four-hour chart as it looks to retake USD1750.

Attention will now turn to US retail sales for further clues. A strong reading implies strengthening domestic consumption and a potential rise in prices – good news for the inflation hedge gold. Until then, gold is expected to remain at the mercy of US dollar dynamics. Analysts are expecting a strong rebound in March retail sales, with a consensus of 5.7% for the headline reading and 5.1% for Core Retail Sales.

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