OPEC oil cuts won't drive inflation high enough to stop gold's run above $2,000 OPECoil gold
- The gold market has room to move higher and retest resistance at $2,000 an ounce as rising oil prices are not expected to drive inflation higher, which will keep the Federal Reserve on track to lower interest rates in the second half of this year, according to some analysts.
Over the weekend, the global oil cartel said it would cut oil production by 1.16 million barrels per day until the end of the year. Saudi Arabia is leading the cuts after it announced it would implement a"voluntary cut" of just under 5% of its output, or 500,000 barrels a day,"in coordination with some other OPEC and non-OPEC countries."
Michele Scheinder, director of trading education and research at MarketGauge, said that if oil prices can see a sustained break above $82 a barrel, she would not rule out a move to $100. However, she added that this will continue to support gold prices as it shows that the Federal Reserve cannot control inflation.
"OPEC is seeing what gold sees, weaker growth later this year. Weaker growth means lower oil demand, so OPEC is a little frustrated with the price action and is just trying to be proactive," he said. He noted that if oil prices stay around $80 a barrel, they will still be down from last year's highs, meaning inflation is still slowing."Inflation will still slow, just not at the pace the Federal Reserve would like," he said.
Hansen said that he also sees gold prices well supported. He noted that despite the OPEC cuts, markets still expect the U.S. central bank to cut rates before the end of the year.
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