WTI Set for Small Weekly Loss; Gold Falls Amid USD Strength/Higher Yields

Key Points

• WTI rose slightly on Friday, supported by bullish OPEC commentary and US inventories earlier this week.
• WTI was still on course for a slight weekly loss, with upside capped amid broader risk-off flows.
• Gold was on track for its worst weekly performance in six on USD strength and higher US yields.

WTI Rises Slightly, But on Course For Weekly Decline

Front-month futures of the US benchmark for sweet light crude oil, West Texas Intermediary or WTI, was choppy on Friday amid risk-off flows in stocks and crypto, and amid upside in the US dollar, all factors that would normally weigh on oil prices. WTI was last changing hands just under $91 per barrel, about 50 cents higher on the day, but still on course to have lost about $1 this week.

Traders cited bullish commentary from OPEC’s Secretary General on Thursday (he was optimistic about demand into 2023), Wednesday’s bullish US inventory report and continued concerns about a fall in Russian crude oil output when the EU toughens sanctions on seaborne imports in the coming months as supportive of prices on Friday.

Copper Prices on Course for Modest Weekly Loss

Copper prices remains supported above $3.60 on Friday, but were still on course to lose a little over 0.5% this week. Commentary from Fed and ECB officials this week has reinforced the notion that both central banks remain committed to a series of further interest rate hikes to battle inflation that remains at multi-decade highs in both the US and Europe. This adds to downside risks to the global economy, keeping copper markets volatile this week.

Weak Chinese data on Monday further exacerbated concerns about the global economic outlook, but copper traders said that this has been negated by hopes that stimulus from Chinese fiscal and monetary authorities can boost copper demand in the medium-term. The PBoC unexpectedly lowered interest rates earlier this week. Meanwhile, falling Chinese copper stocks in warehouses is supporting the idea that, for now, demand in the world’s largest copper consumer remains robust.

Gold Set For Worst Weekly Performance in Six

Gold prices slid a further 0.5% to the $1,750 per troy ounce area on Friday, weighed amid more upside in the US dollar on a mixture of recent hawkishness from Fed policymakers who have spoken this week and safe-haven demand amid concerns about European stagflation and Chinese growth, as well as a sharp rise in yields across the US curve.

US dollar appreciation means that USD-denominated commodities like gold are more expensive for the holders of international currency, reducing demand, while a rise in US bond yields increases the so-called opportunity cost of holding the non-yielding precious metal. Gold was on track for a near 3.0% decline this week, which would mark its worst weekly performance in six.