While crude reacts to geopolitical headlines with more vim and vigor, the real reason that this market is more sensitive to these headlines is that global oil supply is tightening. It's due to the combination of underinvestment in the industry during the recent price crash and a fundamental misunderstanding of how the shale patch works. That has now left the oil market fundamentally undersupplied.
The rebounding U.S. dollar, rising government bond yields and the still-buoyant stock markets are helping to generate significant headwinds for gold. The shiny metal is priced in U.S. dollars and with the greenback rising, this is the main reason behind today’s sell-off. On top of this, the rising government bond yields further reduce the appeal of the noninterest-bearing commodity, while the rebounding European stock markets makes the safe haven asset even less appealing. So, for gold to come back, it needs the dollar, stocks and/or yields to head back south.
Making collusion great again. The OPEC says that its recent move to cut oil production had nothing to do with greed, but they acted with a “noble goal” of rescuing the global oil market. These comments came from the UAE energy minister Suhail Al Mazrouei, who said it’s not about raising prices it is about the noble endeavor of working to reduce oversupply. Well, in a way he does have a point.