Oil shines on Pfizer approval
Crude prices roared back after the Pfizer COVID vaccine got full FDA approval, opening the door for more vaccine mandates which will help get the US to herd immunity. The crude demand outlook will get a boost here now that the delta variant appears to be peaking in the South and as China lowers local COVID cases to zero.
WTI crude prices should be supported going forward as the selloff was overdone and as stockpiles continue to shrink. Oil prices could quickly rally back to USD 70 if the Fed does not send the dollar higher by formally committing to tapering its asset purchases.
Gold is starting to look very attractive again as Treasury yields remain grounded over expectations that the Jackson Hole Symposium will show a wait-and-see approach before committing to tapering asset purchases. Cases are spiking in Wyoming and that has triggered a code red which restricts meetings. Jackson Hole will be virtual again and that makes it unlikely the Fed will want to signal they are ready to slow the pace of asset purchases.
The Fed’s Minutes signalled a taper announcement will happen this year, but delta variant risks will likely make Jackson Hole a somewhat dovish event. The Fed may make a taper announcement in September or November, but it will probably be a slow taper with no commitment over interest rate hikes.
The USD 1850 level is everything for gold and if after the Jackson Hole Symposium, prices can’t make a fresh August high, bullion investors might be quick to the sidelines. Gold should start to form a trading range around the USD 1800 level leading up to Fed Chair Powell’s Friday speech.