Oil lower on demand outlook, Gold’s wild ride

Oil

Crude prices are lower as the short-term demand outlook continues to get downgraded as many European countries seem nowhere near to easing restrictions.  The Suez Canal blockage is now entering its third day and yesterday’s optimism that this will be resolved shortly is quickly fading.  With roughly 12% of global trade using this key canal, the impact will be significant for both China and Europe.  The blockage has impacted over 20 oil tankers and the longer this lasts, it should drive oil prices higher.

WTI crude is in correction territory and consolidating below the USD60 level, but another significant selloff seems unlikely unless a few more European countries announce tighter restrictions.  Europe is slowly getting their vaccine rollout in order and that should trigger energy traders to price in an improved crude demand outlook by the summer.

Gold

Gold prices went on a rollercoaster ride following better-than-expected US economic data and upbeat comments from Fed Chair Powell, Clarida, and Barkin.  Gold’s gyrations are an indication of how divided this market is as to what will be the next big move.  Despite steadying Treasury yields, gold has not mustered much of a rally.  Today’s double main event of the seven-year Treasury auction and President Biden’s first formal press conference could be the catalyst needed for gold to break out.

After months of reiterating that Fed is not ready to start talk about tapering, an early morning NPR interview delivered a candid comment led everyone to think we are a few months away from hearing how the Fed will gradually change policy.  Powell also said that he is generally satisfied with the Fed’s concerted response to the Covid pandemic. The timing of Powell’s comments and better-than-expected jobless claims data and fourth-quarter GDP painted a picture that the economy is about to see substantial progress with employment and pricing pressures.

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
Ed Moya

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