Gold dips, which way oil?

Gold slips in cautious trade

After strong gains in the previous session, gold is trading on the back foot, pulled lower by the upbeat tone in the equities market and a degree of caution among gold traders ahead of the FOMC minutes later today (18:00 GMT).

The reflation trade has been fueling expectations of a strong US economic recovery and a rise in inflation. Investors are convinced that stronger fundamentals will force the Fed to raise interest rates sooner than initially planned. Investors will be pouring over the FOMC minutes for any signs that tightening monetary policy was being discussed at the March meeting. The slightest hint of a more hawkish Fed could drag heavily on non-yielding gold, sending it back towards the recent multi-month low of USD1677. In the meantime, gold continues to take its cues from the direction of US long yields, which have been retreating,  and not from the US dollar.

Oil fails to take USD60.00

Oil prices kicked off the session higher on Wednesday, before quickly paring gains. WTI continues to trade below the key USD60.00 per barrel level. Whilst on the one hand a draw in crude inventories and optimism surrounding the global economic outlook are boosting demand for oil. On the other, concerns over higher output and optimism surrounding the US Iran nuclear programme talks are acting as a drag.

Oil prices are struggling to find their feet. Demand needs to pick up substantially in order for the price to be able to absorb the production increases that OPEC+ are planning over the coming months. Europe’s plans to have herd immunity by the end of June could be a significant factor here but investors will want to see how this pledge plays out in the coming weeks before getting too excited.


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