Oil slumps on outlook concerns, gold consolidating

Risks tilted to the downside for oil

Oil prices are sinking on Thursday after enjoying another positive session yesterday.

Inventory data was positive for prices on the face of it but given the impact of Hurricane Delta, I’m not sure there’s a huge amount to take away from it. And I’m not sure it warrants the continued support we’re still seeing in prices, despite today’s large declines.

This is still an environment that’s very unfavourable for oil prices and with increasing restrictions being imposed across Europe and probably following shortly after across the pond, the demand picture is not looking great.

Perhaps I’m missing something but I struggle to see oil managing to hold on at these levels unless a stimulus package in the US is somehow struck ahead of the election. Even then, the risks remain tilted to the downside medium term, barring another OPEC+ intervention.

Gold content around $1,900

Gold is lingering around $1,900 once again and seems content to hover around this level and wait for the major risk events to pass it by.

The next few weeks could see many of these resolve themselves and could be very positive for risk appetite if they unfold as you’d expect. The challenge for gold and other risk assets is that we live in a very unusual time, one when very little seems to go to plan. And the downside risks are considerable.

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