Oil prices decline over US/Iran talks

Crude prices are dipping over expectations Iran nuclear deal talks could resume as early as next week, as well as expectations that OPEC+ will continue delivering a gradual increase in supplies.  Saudi Arabia energy minister Abdulaziz noted that OPEC+ had a role in containing inflation, which should serve as a reminder that if USD100 oil happens that could be a big hit to demand recovery story.  Abdulaziz maintained his cautious stance but that did not preclude taking action.

Energy markets are in wait-and-see mode until the July 1st OPEC+ meeting and that probably supports some softness with oil prices.  The pent-up demand across the US and large parts of Europe is too strong to warrant a major pullback for crude, so weakness could be limited to a couple of dollars.

Gold stays steady

Gold prices are hanging in there.  Gold is trading sideways over inflation uncertainty, Fed shuffling away from ultra-dovishness, and an unbalanced global economic recovery.  Earlier, gold saw some support after Treasury Secretary Yellen reiterated her belief that inflation is transitory due to supply bottlenecks and that it will go back to normal after this year.

A big part of the longer-term bullish thesis for gold was for a weaker dollar to emerge during the second half of the year.  Part of that argument was for financial markets to price in a broadly widening interest rate differential against the dollar.  The Fed was expected to be the last major central bank to tighten but right now it looks like the ECB and BOE might not be rushing anytime soon to turn hawkish and that will delay dollar weakness.

Gold needs to recapture the USD1,800 level before the end of the month; otherwise, momentum selling will drag it back to the danger zone.

By Ed Moya