Gold & Oil Brief: Surge, Stall, and the Trade Ahead

As we move through August, commodities are holding attention but not leading the narrative. Gold and oil have both delivered impressive moves in recent weeks, but underlying conviction is faltering. With macro risks evolving and speculative flows shifting, the path forward may depend less on momentum and more on what’s quietly building beneath the surface.

Gold: Forecasts Up, Conviction Down

Gold surged above $3,350/oz after weaker-than-expected U.S. jobs data revived expectations for a Fed rate cut in September. Market pricing now places a greater than 90% chance of a cut, helping push even the bearish advocat Citi to revise its 3-month gold forecast higher to $3,500.

But beyond the headlines, the internals tell a more complex story:

• Demand is weakening. Total Q2 gold demand (excluding OTC transactions) dropped to 1,079 tonnes, the lowest since early 2024. Jewelry demand alone fell 14% year-on-year to 356 tonnes.
• Speculative support is thinning. CFTC data shows hedge funds reduced net long positions by the end of July. The recent price rally failed to spark a notable return of speculative buying.
• ETF flows are mixed. July brought inflows to SPDR and iShares, but the year-to-date flows remain muted compared to 2020 levels. For example, SPDR added 26 tonnes in July after losing 30 tonnes in June.
• Consolidation fatigue. The current gold consolidation has now lasted longer than the one seen between late 2024 and early 2025. Prices remain stuck between $3,335 and $3,400, with no sustained breakout despite supportive rate cut bets.

Despite the bullish revisions, gold’s strength is increasingly forecast-driven, not backed by robust demand or speculative positioning. With central banks and ETF flows steady but not accelerating, the risk is that the narrative is running ahead of the data.

Oil: Output Up, Risks Front and Center

OPEC+ has confirmed plans to unwind prior voluntary cuts, adding roughly 550,000 bpd of production by September. This effectively restores output earlier than expected and reintroduces nearly full post-COVID supply.

But the outlook remains highly sensitive:

• Surplus in sight. Bloomberg Intelligence projects a surplus of up to 1 million bpd by year-end if demand growth softens or if geopolitical stability holds.
• Russian flows in question. Russia currently exports 3 million bpd to Asian buyers, but Trump has threatened 100% tariffs on countries like India, China, and Turkey unless a ceasefire in Ukraine is agreed. While enforcement details remain unclear, any disruption to this flow could trigger a price spike.
• Speculative shorts are rising. US Oil Crude short positions have increased notably in recent weeks, leaving the market vulnerable to a sharp bounce on any unexpected supply hit.
• Spare capacity is high. Even with production rising, OPEC retains significant spare capacity. That alone limits bullish urgency and could pressure prices further if demand doesn't pick up.
• Seasonality implies pause. Historical trends suggest oil tends to consolidate during late summer. That’s playing out now, with prices stuck between $77 and $83/bbl.

Oil is no longer just a demand-supply story, it's a headline-sensitive trade. The balance could shift quickly on geopolitical events, especially given how lopsided speculative sentiment has become.

The technicals

Oil – US Crude continues to move sideways between $64.50 and $68.20, reflecting a stall in directional conviction. Prices are now testing the lower band of this range amid rising production from OPEC+. A break below could trigger a sharper move, unless geopolitical risk steps in to offer support, particularly from Russian supply disruptions.

Gold: Despite a recent recoveru, spot gold remains below the year-to-date uptrend and triangle formation. Price action has returned to test the $3,375 zone but hasn’t reclaimed the rising support it broke in July, keeping pressure in play unless $3,400 is cleared decisively.