Two trades to watch: Gold, oil
Fiona Cincotta August 27, 2021 3:04 AM
Gold advances ahead of Powell's speech. WTI crude oil set for almost 10% gains this week - Baker Hughes rig count & Powell's impact on the USD in focus.
Gold advances ahead of Fed Powell’s speech
Gold is pushing higher on Friday after a choppy session on Thursday saw the precious metal settle almost flat on the day.
Whilst geopolitical tensions in Afghanistan are underpinning the precious metal, hawkish commentary from Fed speakers yesterday hit demand for non-yielding gold.
Today Gold is pushing higher ahead of Fed Chair Jerome Powell’s speech at the second day of the Jackson Hole event.
Investors will be looking for clues over the timing of the Fed tapering bond purchases, although bets have been eased amid rising covid cases.
While PCE data ahead of the speech could attract some attention, Powell’s speech will set the tone in gold for the coming days.
Any clues that tapering is imminent could send gold prices lower.
Oil set for almost 10% weekly gains
Oil prices are on the rise putting oil on track to post gains of almost 10% so far this week. Oil prices have been on the rise amid expectations of production disruption ahead of a hurricane due to hit the gild of Mexico this weekend. Evacuations of oil platforms are already in progress. Any slowdown in production here is crucial given that the Gulf of Mexico’s offshore wells account for around 17% of US crude oil production.
Also supporting oil prices are expectations that OPEC will hold off from any further rises in output in its meeting next week light of concerns over the delta variants impact on demand.
Baker Hughes rig count in addition to Fed Chair Powell’s speech will be in focus this afternoon. Should Powell follow the lead of the more hawkish policy makers and we see guidance towards earlier tapering, the US Dollar could jump, dragging on oil prices.
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