Oil awaits Iran developments
After a sharp run-up at the start of the week, oil prices continue to trade within a tight range on Thursday. Investors are mulling over familiar fundamentals while awaiting fresh impetus.
On the one hand, optimism surrounding Western economies reopening and expectations of a strong US driving season are lifting the demand outlook. Encouragingly, EIA data reported a larger-than-expected drawdown in US oil inventories.
However, this is being offset by elevated Covid cases in India and Japan and the potential of Iranian oil returning supply returning to the market.
The market remains focused on indirect Iran-US nuclear talks, which are taking place again this week. However, even if an agreement is reached soon, the full lifting of sanctions on Iranian oil exports is unlikely to happen until later in the year and will be gradual. As a result, oil prices remain supported at these levels.
Gold pauses at USD1900 ahead of data
After hitting a four-month high in the previous session, gold pared gains ending the session mildly lower as the US dollar rebounded. Today, gold is once again aiming higher as the bulls look to take back control. May has been an incredible month for the yellow metal, which has rallied more than 7% so far, making this its strongest monthly gain since July last year, when the price closed in on USD2000.
While inflation fears have stalked the markets across the month, the Fed has been consistent and vocal in reining in expectations of a move to tighten policy. US treasury yields have moved lower across May and remain comfortably below 1.60%. The greenback also trades under pressure around multi-month lows, supporting the dollar-denominated precious metal.
Attention will now shift towards a barrage of US data, including the Q1 GDP revision, durable goods orders and jobless claims.
