Oil rebound short-lived, gold recovery gathering momentum

A combination of bearish factors hit oil

Oil prices are heading lower again today as downside pressures return following a successful end to the pay dispute in Norway – that threatened to cut output by 966,000 barrels per day this week – and as Hurricane Delta is downgraded to a post-tropical cyclone, allowing workers to return and production to shortly restart.

At the same time, Libyan output is continuing to rise after a force majeure at its Sharara oil field – the country’s largest – was lifted, bringing production up to around 355,000 barrels per day. It’s maybe surprising that the unwinding of positions is taking as long as it is, with WTI seeing some support around $40 but I don’t expect that to last.

Gold turns more bullish on US optimism

Gold is paring Friday’s gains after driving back above $1,900 before seeing some resistance around $1,930. The yellow metal certainly picked up some momentum at the end of the week as the dollar came under pressure. It seems investors are becoming a little more optimistic, perhaps driven by the widening polls and hope of limited election disruption and uncertainty, combined with fiscal stimulus prospects.

They may be a little premature in both cases which could leave the market vulnerable to sudden and sharp corrections, but there’s clearly some optimism building. We’ve seen some profit taking around the 38.2 fib from the August peak to September low but given the momentum that’s building, that may not last. The downtrend appears to have broken and cautious optimism may turn into something more if we see positive progress in both cases.

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