Oil rises, gold gets reprieve

Oil rises on economic recovery optimism

After a softer start to the week, oil is charging higher for a second straight session, boosted by the improving economic outlook, even as inventory data made for grim reading.

The passing of the US stimulus package is music to the ears of oil bulls. Such a huge injection of stimulus into the system sends a strong message on the direction of the US economic recovery and future oil demand.

That said, gains are likely to be capped following the EIA data. US crude stockpiles hit 13.8 million barrels as the impact of the Texas cold snap, which halted some production, continues to be reflected in the system. This was well ahead of 816,000 build forecast, although down from the previous week’s 21.5 million. While inventories are moving in the right direction, the market will likely want to see these figures back within a more normal range before Monday’s highs are revisited.

 

Gold rises but longer-term negative bias remains

Gold is extending gains into a third straight session after it experienced a significant breakdown over the previous two weeks. Rising treasury yields had left the precious metal unloved and firmly in correction territory.

While yields have eased back, the fundamental landscape remains relatively unchanged. Should yields start to rise again, which looks likely given the US stimulus package approval, then gold could well start to weaken once more. The longer-term technical outlook remains bearish with the precious metal showing a series of lower lows and lower highs since August.

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.

Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.