Japan and India’s covid crisis weighs on oil
Oil is being dragged lower by the deepening covid crisis in India and Japan. As the world’s third and fourth-largest importers of oil see lockdown restrictions tighten, the demand outlook for oil is softening. Higher mobility retractions in these countries is hitting fuel demand expectations.
Japan announced on Sunday a state of emergency in Tokyo, Osaka and two other prefectures. India recorded yet another horrifying record number of new daily infections, topping 350,000 and an extension to the lockdown in New Delhi. Covid numbers in these key countries are moving in the wrong direction for oil bulls to be able to stage any meaningful turnaround.
Oil has tumbled over 1.5% so far today. However, it remains above the key USD60 support for now thanks in part to a weaker US dollar and optimism surrounding the fast vaccine rollout West. Looking ahead, the OPEC meeting on Wednesday is unlikely to see any change in output given that Covid continues to cloud the demand picture.
Gold looks to the Fed
The precious metal is edging marginally higher at the start of the week. A falling US dollar and depressed Treasury yields are underpinning the precious metal. Concerns over rising covid cases in Asia are boosting the lure of the safe haven. Although the risk-on mood seen in the equity market is capping gains in gold.
Investors are unlikely to take any aggressive positions in gold ahead of the FOMC on Wednesday. The Fed is expected to stick with the status quo. As the bond market rout comes under control, yields ease and order is restored to the financial markets, the Fed is unlikely to rock the boat with taper talk. Still, any hints that the improving economic picture in the US could lead to policy being tightened sooner could see non-yielding gold fall lower.
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