Commodities Face Weak Dollar, Demand Concerns; Oil Struggles, Gold Awaits Inflation Report

• Commodities get little support from a weaker dollar
• Demand destruction likely to force Saudis to extend cuts
• Bitcoin holds onto the $30,000 level

Oil

Crude prices are weakening as concerns mount that the global growth outlook is getting uglier by the day.  China is rushing to deliver more support to their real estate crisis, while the US starts to grow more nervous about a potential recession. Oil will struggle this week if inflation readings in the US support the hawkish case for a couple more rate hikes, while Euro-area industrial production remains lackluster.

A bullish backwardation structure should help WTI crude find a home above the $70 level, but it seems unlikely that the demand outlook will get any good news this week.  Recession risks might rise, but it seems energy traders are confident OPEC+ will keep supplies tight.

 

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Gold

Gold prices are hovering last week’s low as traders await a pivotal inflation report that seal the deal for a couple more Fed rate hikes.  Bullion traders want to know if core CPI will show persistence and raise the odds that the Fed will not just go in July but more likely also in September.  Even if we get a hot report, the Fed is locked into delivering a quarter-point rate rise.  Following last month’s pause, the Fed seems positioned to remain aggressive with signaling tightening until we see a much more meaningful slowdown. Gold might end up trading rangebound this week, but the $1900 level should hold as long Wednesday’s inflation report is not scorching hot.