Oil volatile, gold rises

Oil

Crude price volatility is here to stay as demand uncertainty remains elevated over the short term.  There is a lot of noise in all this morning’s headlines, but given the relentless winning streak, oil prices are ripe for significant rounds of profit-taking.  Earlier oil prices were supported after Russia told Europe they won’t get extra gas without granting approval of Nord Stream 2.  Shortfalls in natural gas will clearly lead to added demand for crude, but energy traders faded that move as Russia is known to always be posturing.

The IAEA Chief noted that surveillance at the Tesa Karaj facility was no longer “intact”.  Expectations were growing that Iran was shortly going to return to the negotiating table for reviving the 2015 nuclear deal, but if IAEA can’t monitor Iran’s nuclear activity, energy traders won’t hold their breath for any breakthroughs.  Expectations for a revival of the nuclear deal will drift into next year and so could possible sanction relief and more barrels of Iranian crude.

WTI crude is ripe for a pullback but any weakness might be limited as the short-term outlook still remains very bullish.

Gold in choppy waters

Gold prices are rallying as the return of risk appetite sent the dollar lower.  Gold will remain a choppy trade as investor expectations on rate hike timing will be dictated over the next few inflation reports.  Everything from earnings season suggests pricing pressures will remain over the next couple of quarters and that could keep the upward yield pressure on the shorter end of the curve.  Complicating the short-term outlook for gold is the inability of lawmakers in getting Biden’s infrastructure deal and economic package done.  Talks will drag into November and this will delay the economic recovery.

A wrath of Fed speak might provide some insights over what Fed Chair Powell might say on Friday.  Concessions that inflation is persisting could tentatively send gold prices lower.

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