OPEC announces surprise cut, gold gains ground

OPEC+ in no mood to tolerate lower oil prices

OPEC+ were the latest to ensure there’s no such thing as a quiet weekend these days, announcing a surprise cut to production of more than a million barrels per day and sending prices soaring on the open.

The decision clearly caught traders off guard and for good reason. Aside from the uncertain nature of the outlook, which would have been reason enough to warrant holding for now, the direction from within the cartel had indicated that no changes would be forthcoming.

Clearly, OPEC+ is far more interested in price than they’ve previously claimed. And not with respect to setting a fair price, just putting a floor beneath it. Of course, this isn’t the first pre-emptive cut that’s caused uproar and the group will point to that as evidence that it’s acting on supply and demand dynamics, rather than just price.

But it will once more raise a few eyebrows with respect to where its priorities and loyalties lie. The fact that Russia is a member of this alliance doesn’t help with that. From a market perspective, what it does do is reinforce the floor in prices as we know the group won’t hesitate to intervene again.

Gold eyeing highs as bond yields soften again

Gold is trading around 1% higher and potentially eyeing another run at $2,000 where it has recently run into a lot of resistance. A significant break above here could be a very bullish signal with the next major obstacle being the all-time high around $2,070.

The yellow metal has been buoyed by lower yields and a slightly softer dollar, with traders still seemingly of the view that the Fed may be done and forced to cut rates a few times before the year is out.

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