Oil building momentum as highs tested
Oil prices are slipping a little again on Wednesday, off just over 1%, having risen close to their range highs again yesterday.
WTI came within a whisker of $42 and, despite today’s pullback, seems to have momentum on its side. An overconfidence, perhaps, that a stimulus deal will be reached and that OPEC+ has the markets back, despite passing up the opportunity this week to delay two million barrels of production restarts from January.
Of course, they can pull the trigger on that delay at any point and they meet again in December which may be a better time to announce such a move.
By then they’ll know who the US President is going to be for the next four years, how bad the second wave is and how quickly Libya is ramping up production, for example. Still, this confidence in the markets remains overly optimistic and signficant risk lies below, as a result.
Bullish momentum growing for gold
Gold has been choppy for days and has barely progressed in either direction, much like the talks in Washington.
There is slightly more optimism that a deal will be reached between Mnuchin and Pelosi as the White House ups its offer again in a bid to tempt the House Majority Leader into a deal, which is weighing on the dollar and providing some support for the yellow metal.
There is still some hesitancy though, with gold once again running into some resistance around $1,920 where we’re once again seeing some profit taking. Once again, the bulls appear to have momentum on their side while the bigger risks remain below if a package isn’t agreed.
A significant move above $1,930 or below $1,880 could trigger a significant breakout from the consolidation we’ve seen recently.