Article by: ETO Markets

Gold (XAU/USD) has seen a slight recovery on Friday, even with the US Dollar (USD) showing strength. However, the upside for gold might be capped due to reduced expectations of a US Federal Reserve (Fed) rate cut in September. Rising geopolitical tensions in the Middle East could provide some support for the yellow metal due to increased safe-haven demand.

Gold traders should watch for insights from Fed officials, with Fed's Waller scheduled to speak on Friday. Hawkish comments from Fed policymakers could put downward pressure on gold, as higher interest rates typically increase the opportunity cost of holding non-yielding assets like gold.

Additionally, upcoming US economic data releases, including

- Durable Goods Orders 
- The Michigan Consumer Sentiment Index

Stay updated with Fed speeches and economic indicators to navigate the gold market effectively.

West Texas Intermediate (WTI) crude oil futures on the NYMEX are poised to end the week with a bearish outlook. Oil prices have declined for five consecutive sessions as of Friday. The market remains under pressure as the Federal Reserve (Fed) continues to signal a hawkish stance on interest rates, despite an anticipated drop in the U.S. Consumer Price Index (CPI) for April.

Fed officials are skeptical about the ongoing disinflation process due to the robust labor market. They have made it clear that interest rate cuts will only be considered if there is strong evidence that inflation is on track to sustainably return to the 2% target.

The minutes from the Federal Open Market Committee (FOMC) meeting in May reveal that some policymakers support further monetary tightening to ensure price stability. However, Fed Chair Jerome Powell and the majority of policymakers believe additional rate hikes are unlikely at this time.

The Fed's hawkish outlook on interest rates negatively impacts oil prices. Higher interest rates reduce liquidity, which in turn decreases consumer spending and economic activity, ultimately lowering overall oil demand.

Looking ahead, the next significant event for oil prices is the OPEC meeting on June 1, where supply policy will be discussed. In their last meeting on April 13, OPEC members decided to maintain the current voluntary oil output cut of 2.2 million barrels per day.

Key Takeaways for Oil Traders:
- WTI crude oil futures are on a bearish trend due to the Fed's hawkish stance.
- Interest rates are a critical factor influencing oil prices and market liquidity.
- The upcoming OPEC meeting on June 1 is a potential catalyst for future oil price movements.