Oil:
Oil traded yesterday as high as 86.5$ a barrel after surprising results and information regarding US energy. Oil inventories dropped 4.7 million barrels, 3 times more than was predicted. This huge drop in inventory was not expected given that demand is slowing, particularly as global recession fears are fueled by 2 of the major consumers in the world, the US and China.
The Federal Reserve’s latest policy meeting disappointed investors as most of governors would approve of another QE, but only if the economy suffers from lower growth rates, inflation falling below goal and higher jobless claims. With no monetary easing present, oil lost its momentum and plunged by almost 1$ a barrel.
Investors could expect another decline in price if we don’t see news results either from the economy or from policy makers.
Gold:
Monetary easing expectations have lowered the price of gold after several related news items over the past few days. Federal Reserve minutes have been published which lowered expectation for more Quantative easing in the market. Gold dropped to 1569$ after trading yesterday as high as 1582$. The 1600$ barrier is drifting away and prospects of low inflation may drag the price of gold to forgotten territories.
Weekly unemployment claims from the US will likely lower the price of gold as low inflation is expected, and QE or another Operation Twist will likely not take effect before September.
Any decline in jobs will therefore appreciate the US dollar and lower the price of Gold.