Gold and Oil React to Economic and Political Turmoil: Amid a cautious economic atmosphere and rapidly evolving geopolitical developments,
gold maintained its gains, supported by expectations of U.S. interest rate cuts. At the same time,
oil prices came under increasing pressure due to concerns over a supply surplus.

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Gold

Oil

Gold Benefits from Weak U.S. Data and Trade Tensions

Gold posted a stable performance, benefiting from weaker-than-expected U.S. economic
data that strengthened the likelihood of the Federal Reserve
cutting interest rates at least twice this year to avoid a recession.
Gold traded near $3,375 per ounce after a 0.6% rise on Wednesday,
supported by reports showing a contraction in the U.S. services sector and a slowdown in employment growth.

This performance coincided with a drop in U.S. Treasury yields and market pricing for
potential rate cuts in October and December. Lower interest rates traditionally support gold,
as the metal yields no returns.

Meanwhile, renewed trade tensions between the U.S. and its key partners resurfaced market concerns,
especially after President Donald Trump doubled tariffs on steel and aluminum
and described Chinese President Xi Jinping as “tough to make a deal with.”
These tensions further boosted gold’s appeal as a haven,
with prices up nearly 30% since the start of the year, hitting a record high in April.

Central banks also significantly contributed to higher gold prices,
continuing to purchase the precious metal as a hedge against geopolitical risks and overexposure to the U.S. dollar.

Oil Markets Decline Under Supply Surplus and Production Growth Pressure

On the other hand, oil prices fell notably amid reports that the “OPEC+” alliance is considering
another significant production increase,
raising fears of a supply glut this year. Brent crude dropped below $65 per barrel,
while West Texas Intermediate (WTI) crude slipped below $63.

Although markets found some relief earlier in the week following “OPEC+”
announcing production increases in line with expectations,
alleviating fears of larger supply boosts, prices remain down about 12% since the start of 2025.
This is attributed to the coalition’s weakened stance on price defense through
output cuts and concerns that the U.S.-led trade wars could negatively affect global oil demand.

These concerns overshadowed U.S. government data showing a significant 4.3 million
barrel drop in crude inventories last week,
although falling gasoline demand offset the positive impact.

Conversely, the widening prompt spread between Brent contracts indicates a continued state of backwardation,
which suggests short-term supply tightness.
This supports the view that markets may see relative strength in the near term,
despite ongoing structural pressures.

Gold and Oil React to Economic and Political Turmoil

Gold and Oil React to Economic and Political Turmoil

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