OIL: Crude Under Pressure on OPEC, US Trade Tensions

From our Policy Team: The World Bank slashed this year's global growth forecast almost half a percentage point to 2.3% on the U.S.-led trade war and said economic expansion over the next two years is set to be the weakest since the 1960s. 

This year's growth would be the slowest since 2008 outside of an outside recession, which is not expected now, according to the development institution's report Tuesday. Growth estimates are being cut across 70% of nations.

"If today’s trade disputes were resolved with agreements that halve tariffs relative to their levels in late May, global growth would be 0.2 percentage point stronger on average over the course of 2025 and 2026," the report said. “Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,” said M. Ayhan Kose, the World Bank’s Deputy Chief Economist, in a press release. 

US Cash opening calls, set for a flat steady Open as investors await on fresh Trade news, but especially the US CPI Tomorrow, the main Data release for this Week.

• Calls: SPX: 6,015.2 (+0.2%); DJIA: 42,787 (+0.1%/+25pts); NDX: 21,835.7 (+0.2%).

The latest pullback in Gold appears corrective in nature, with medium-term trend signals remaining bullish. However, the outcome of today’s US-China trade talks will be key for near-term sentiment. Initial support to monitor in the event of a positive tariff outcome is the 50-day EMA at $3,242.4, which shields key support at $3,121.0 (May 15 low). Should these support levels hold, or if talks do not bring a de-escalatory outcome, it may provide a platform to build back towards the June 5 high at $3,403.5 and the May 7 high of $3,435.6.

• In recent weeks, we have highlighted that the positioning backdrop in gold futures was attractive for those looking to re-engage longs. Indeed, CFTC data in the week to June 3 indicated a 13.7k build up of non-commercial net longs, the third consecutive weekly increase and the largest since the week to March 18.
• Reviewing the latest trends in structural sources of gold demand using data from the World Gold Council:
  • ETF flows were negative 19.1 tonnes in May, the first negative month since November 2024. Outflows were concentrated between May 9 – May 16 (i.e. encompassing the May 12 US/China trade agreement announcement). Weekly flows since May 16 have all be positive.
  • Central Bank’s bought 14.8 tonnes of gold in April. This included 12 tonnes from Poland and 2.2 tonnes from China. However, it’s worth noting speculation in recent weeks that some central banks (e.g. the PBOC) may be underreporting their gold holdings.
• Although Gold’s impressive rally has stalled somewhat over the last month, we have started to see increased upside participation from other precious metals such as silver and platinum in June. These rallies appear to have been driven by lower prevailing levels of vol and a retrenchment of tariff risk. A positive tariff-talk outcome between the US and China could see these trends extend, likely at Gold’s expense.