Downside risks building for oil and gold

Oil swimming against the tide

The rebound in risk appetite today is lifting oil prices a little but it’s already faces stiff resistance.

A rally in oil may feel like swimming against the tide in the near-term, with rising Covid cases and restrictions likely to weigh on economic activity and therefore demand. Barring another intervention from OPEC+, which is looking increasingly likely at some point, the path of least resistance is downward.

And with the dollar shaking off the remaining bears and hitting two months highs, the headwinds are only growing.

Gold facing significant downside

The near-term outlook for gold is looking worse by the day, with the yellow metal breaking $1,900 just as the dollar hits a two month high, taking out key resistance along the way.

The bear-case for the yellow metal has been building for some time, with the dollar threatening a correction but just failing to gain the momentum at the right time. Now that it appears to have gathered that support, gold could retreat much further, with $1,860 the next test but $1,800 perfectly feasible.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam