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.
Gold
Gold prices are softening as the dollar firms up after reports that the BOJ is leaning towards leaving yield curve control strategy unchanged. The dollar is riding a small wave here and that is putting gold’s third weekly gain at risk. Gold traders have a lot of news to follow next week and that could support a deeper pullback if the Fed keeps optionality for more tightening on the table and if earnings continue to mostly suggest the resilience of the US economy remains.
Before the central bank fireworks ignite next week, gold seems like it will consolidate between the $1940 and $1980 range.
