Commodities Diverge: Oil Gains on Global Demand Optimism, While Gold Struggles Amid Tight Labor Market and Rate Hike Speculation

Commodities are starting to post some diverging trends as US soft landing hopes improve. Oil has benefited from a resilient US economy, but gold has struggled as a tight labor market suggests the Fed may need to keep interest rates higher for longer. A recent Bloomberg survey noted that firmer growth prospects are expected through Q3, potentially rising 0.5%. The outlook for Q4 is GDP to contract 0.4%.

Oil

Oil prices are rising on optimism that the outlooks for China and India should keep the global crude demand outlook intact, while OPEC+ will make sure the market remains tight. UAE Energy Minister al-Mazrouei noted actions by OPEC+ to support the oil market were sufficient for now and the group is “only a phone call away” if any further steps are needed. He told Reuters that “But we are constantly meeting and if there is a requirement to do anything else then during those meetings, we will pick it up. We are always a phone call away from each other.”

WTI crude has been rising since the end of June but has clearly found resistance just above the $77 level. Next week, energy traders will have to pay attention to global flash PMI readings, a handful of major energy companies earnings, the standard weekly stockpile data points and some energy conferences which could provide some insight for the future shifts with supply and demand.

WTI crude might continue its consolidation pattern between the $74 to $77 level.

Ed Moya

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.