Crude prices rallied on an improving demand outlook and over expectations the market will remain tight as OPEC+ is likely to only deliver a small boost to output at the July 1st ministerial meeting. The energy markets are still optimistic that the delta-plus COVID-19 variant won’t derail the reopening momentum seen across Europe and Asia. The crude demand outlook is getting hot as Americans embrace a travel intensive summer (cars, planes, and cruises), the global vaccination rollout is improving, and China’s crude stockpiles are at the lowest level since early February.
WTI crude will likely settle around the mid-$70s until energy traders have certainty over how much Iranian output will increase. The seventh round of Iran nuclear talks still seem poised to get a deal done before the August 3rd Iranian inauguration day.
Gold prices pared gains Treasury yields pushed higher following an upwardly revised University of Michigan 12-month inflation expectations from 4.0% to 4.2%. The consumer sentiment report was filled with unfavorable perception of market prices, rising income gains for the top income third, and concerns over high home, vehicle, and household durable pressures.
Gold initially rallied after the Fed’ preferred inflation gauge, the personal consumption expenditure index delivered a surprising softer print. Gold will likely continue to stabilize going forward as the majority of Fed Chair Powell’s policymakers agree with him that inflation will be transitory. The US economy will still see a healthy dose of stimulus over the next year and that should keep gold’s stimulus trade running strong.
Bitcoin is settling closer to the bottom of its recent trading range as miners struggle to ramp up operations outside of China. This is a necessary growing pain that will take time to work itself out. Bitcoin’s longer-term bullish argument is intact but unless fresh endorsements are made on Wall Street, downside risks remain in place.