Oil retreats, gold falls

Brent crude slips below USD 70

A tight oil market saw crude prices jump after Yemen’s Houthi rebels launched ballistic missiles and drones at an Aramco oil facility in eastern Saudi Arabia on Sunday.  Despite no production being impacted, Brent surged to USD71.36 a barrel on Sunday night as the dollar initially weakened.  Energy traders quickly remembered the 2019 attacks on two of Saudi Arabia’s biggest crude oil production plants.  There is a lot of spare capacity in the oil market, so it would take a massive attack on a Saudi oil facility to warrant a significant move higher with oil prices.

Since November, oil prices have been on a tear as COVID vaccine success drove up crude demand expectations and now that OPEC+ has signaled they will wait to see demand pickup before increasing output collectively.  With Europe and emerging markets still in the early stages of their respective economic recoveries, higher oil prices could disrupt that, and that is not good for a key portion of the crude demand outlook.

Gold

Gold prices can’t shake off the strong rise in Treasury yields which is delivering dollar strength.  Gold’s fundamentals are a little ‘out of whack’ right now.  The US is about to finalize Biden’s massive USD1.9 trillion COVID relief bill and resume infrastructure spending talks and gold is resuming its freefall.  It seems gold can’t reassert any bullishness until the dollar rally is believed to be over.

Gold is still vulnerable as the short-term outlook still calls for US growth exceptionalism and that could keep the dollar strong over the next couple of weeks.  Eventually the move in the bond market will trigger a pushback from the Fed and that should be the all-clear sign for gold investors.  Gold’s medium-term outlook still calls for a significant rebound as central bank buying improves and as jewelry demand bounces back.  If gold continues to hold the USD1650 level, investors could start to scale back into the precious metal.

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.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya