Oil consolidates, gold higher

Oil looking for direction

Crude prices are struggling for direction as short-term COVID pressures are countered by a much weaker US dollar. There were no real fireworks from the FOMC minutes and no new emerging drivers for oil prices, leaving crude directionless.

Some risks are brewing in the fight against COVID; China is facing a supply shortage for their vaccines, the US school-reopening is in jeopardy among virus spread with youth sports, and vaccine efficacy could be at risk as some European countries contemplate spreading out the time between first and second vaccine doses.

Tightening supplies could continue despite some of the short-term headwinds to the demand outlook.  WTI crude continues to consolidate but could start to push higher if dollar weakness accelerates.

Powell/Gold

Gold prices are breaking out as Treasury yields and the dollar continue to slide on further acceptance that the Federal Reserve is nowhere near ready to discuss exit strategies.  The doves are in control and today’s cautious comments from Fed Chair Jerome Powell delivered another reiteration of their ultra-accommodative stance.

Powell’s comments are a reminder that no matter what the data says over the next couple of months, the economic recovery will be incomplete and uneven and likely warrant no change in policy for a long time.  He added that now is not the time to pare back support, highlighting that the unemployment rate among the bottom quartile is 20%.  The Fed’s job won’t be over until 9-10 million Americans are no longer out of work.  Substantial progress will require a handful of months of inflation running above the Fed’s target and for the majority of the remaining 8-million lost jobs during the pandemic to return.

Gold momentum is building and could trigger a rally above the USD1,800 level if the Treasury yields across the curve remain heavy.

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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