Oil rebounds, gold shines

Oil prices rally on EU rollout, IMF

And just like that oil prices are looking bullish.  Crude prices are rallying on optimism the EU will have enough vaccine supplies to immunize the majority of people by the end of June and on the IMF’s improved global economic outlook for 2021.  If Europe’s crude demand outlook continues to improve, oil prices could easily rally another USD5 over the next month.

Another key event for the energy market is upon us, as world leaders look to revitalize the Iran nuclear deal.  If Iran and the US stay on the diplomacy course, Iran eventually could have sanctions lifted, which would mean more crude output as restrictions will end on oil sales.

WTI crude still remains trapped in a very tight range but fears a deeper pullback have eased.  Key resistance will remain the USD62.50 level, which might only get tested if US crude oil inventories continue to decline.

Gold

Gold is starting to look good again as Treasury yields continue to struggle despite growing optimism for the global economic recovery.  Talk of real rates turning positive seems premature, especially considering we will need to see at the very least a couple of hot inflation readings.  The path for Treasury yields (both nominal and real) is clearly higher, but for the next month or two a consolidation could be the trade and that will be very positive for gold prices.

This seems to be a rare day that has gold rallying while bitcoin and Treasury yields are lower.  The bottom is clearly in place for gold, but a strong V-shaped move higher is unlikely as Treasury yields will grind higher.

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