GOLD & CRUDE OIL TALKING POINTS:
- Gold prices[1] on the cusp of trend reversal before services ISM data
- Risk appetite recovery driving another upshift in Fed rates outlook
- Crude oil prices[2] eye API inventory data after hitting 2-month low
Gold prices probed higher as the US Dollar[3] retreated in the first half of the week’s opening session but the rally was arrested as the benchmark currency seesawed higher midday. The upswing tracked a move higher in front-end Treasury bond yields and a steepening of the priced-in 2019 rate hike outlook implied in Fed Funds futures.
Last week’s political instability in Italy saw the greenback reclaim its haven asset credentials, finding support amid the turmoil. The easing of those concerns has translated into some understandable retracement of those gains. However, the reach for yield consistent with the return to “risk-on” trade has also reminded investors that the Fed boasts the most hawkish posture among its G10 counterparts.
Meanwhile, crude oil prices fell to the lowest level in nearly two months amid speculation that the OPEC-led group of top producers is preparing to dial back a coordinated output cut scheme meant to reduce global oversupply. Ministers from several OPEC countries said they want to “ensure stable supplies are made available in a timely manner” at an unofficial meeting in Kuwait City over the weekend.
SERVICES ISM SURVEY, API INVENTORY DATA DUE
Looking ahead, the non-manufacturing ISM survey is expected to show that the pace of activity growth in the US service sector accelerated in May. An upbeat result echoing Friday’s impressively strong labor-market data might stoke Fed rate hike speculation further,
