Oil consolidates near winter highs, record high ambitions for gold bulls

Are calls for $100 oil premature?

The surprise OPEC+ output cut continues to dominate price action in oil markets.

The reduction was substantial but pre-emptive which has left traders questioning whether this was just a price issue or a belief that the global economy is heading for a difficult period. Crude prices have held onto the initial gains and have been in consolidation since having failed to break beyond the highs of the range they traded in from early December to mid-March. 

There have been some bullish calls on oil prices but it’s worth remembering that there’s a reason oil prices were struggling to fully recover the losses in the aftermath of the banking turmoil. Tighter credit conditions mean a slower economy, even recession, and lower demand. The extent of that at this point isn’t clear though and only when it is can we properly judge what the price impact of the cuts is.

BCOUSD Technical Chart

BCOUSD chart prepared using Trading View

It continues to trade near the upper end of the channel and just shy of past resistance above $89. A break above both of these could be a bullish signal while a move above the 200 and 233-day simple moving averages would reinforce that.

Gold settles above $2,000 ahead of jobs report

XAUUSD Technical Chart

XAUUSD chart prepared using Trading View

The outlook for gold is closely tied to that of US yields which have fallen considerably in the aftermath of the banking turmoil and are falling once more as recession fears resurface. That’s helped propel gold above $2,000, a level above which it has only ever spent a handful of days. The yellow metal may have record-high ambitions having overcome that psychological resistance but that may depend on yields slipping further. 

Whether that comes from recession fears, lower inflation, increasing labour market slack, or a combination of these, investors are becoming increasingly confident that the Fed is done and will be forced to reverse course a few times later in the year.

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