Oil – targets yearly high
Oil prices are surging higher at the start of the week, rebounding from Friday’s steep 3% selloff, bringing the yearly high target of USD63.70 back into sight.
The risk on mood and prospect of stronger future demand are helping to buoy the black gold. Iran’s flat out dismal to reopen nuclear talks with the EU and the US, while US-imposed sanctions remain in place, also underpin the price. Supporting the mood of optimism in the market is the progress of the Biden administration’s huge US stimulus package. The bill, which was voted through the House of Representatives over the weekend and now heads to the Senate, where it will face a stiff challenge but is expected to be approved.
The approval of the Johnson & Johnson one-shot covid vaccine has the potential to speed up the vaccine rollout program considerably.
However, upside could be limited as we move towards the OPEC+ meeting later this week with chatter and speculation pointing towards an easing of output restrictions. Size matters with the OPEC+ group set to discuss upping production by as much as 1.5 million barrels a day. The market knows an increase is on the cards, however, anything around 500,000 barrels a day could still be considered bullish for oil prices.
Gold – dead cat bounce
Despite the firm risk on mood, gold is finding its feet again after tanking over 2.7% across the previous week. The precious metal is managing to find support from retreating bond yields and from the rising prospect of a huge US covid stimulus bill. On the other hand, the bears will be keeping a firm eye on the bond market. Furthermore, the US dollar is starting to inch higher as the European session progresses so gains in the precious metal could well be a dead cat bounce rather than any significant reversal in trend.
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