Oil pares gains but short-term bullish factors remain
Oil’s rebound has been strong but the collapse of stimulus talks in the US has triggered some profit taking, pulling WTI more than 3% of yesterday’s peak.
Obviously, anything that threatens the US economy in the final quarter of the year and leads to a spike in permanent unemployment is a negative for oil prices but it does come at a time of short-term bullishness for crude.
The strikes in Norway and the imminent arrival of Hurricane Delta in the Gulf of Mexico means more forced outages, providing temporary support for oil prices. The length of the strikes and severity of the damage suffered will determine just how sustainable the rebound in prices will be.
Gold slides as risk-appetite takes a hit
Gold is slightly higher today after falling more than 2% on Tuesday, in the aftermath of Trump’s tweet.
A traditional safe haven but now aligned more with riskier instruments, gold has been recovering from its mid-September sell-off but yesterday wiped out the efforts of the five days that preceded it.
I’m not convinced the dollar rebound is complete and, by extension, that the gold correction is over either. From its peak, gold fell more than 10% but this is still well above the levels it traded at earlier in the summer and the dollar still feels like it has some upside left in it.
Longer term, I remain bullish gold but yesterday has only further convinced me that a little more downside may still be on the cards.
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