Oil steady, gold dips on higher US yields

Oil markets unchanged in Asia

Oil markets edged lower in New York on Friday, as the US dollar strengthened modestly. Overall, the trading was directionless as both Brent crude and WTI continue consolidating in the middle of their one-month ranges, awaiting new directional inputs. It is a similar story in Asia, with Brent crude unchanged at USD63.00 a barrel, and WTI unchanged at USD59.30 a barrel.

In the bigger picture, Brent crude continues to trade noisily between USD60.00 and USD65.00 a barrel, and WTI’s between USD57.50 and USD62.50 a barrel. Intraday sentiment and flows continue to dominate proceedings. A breakout of those wider ranges will signal oil’s next directional move.

Gold retreats on higher US yields

Gold’s correlation to the US 10-year bond continues, with higher yields on Friday pushing gold lower by 0.67% to USD1744.00 an ounce. Gold has edged another 0.30% lower to USD1738.50 an ounce in quiet Asian trading.

Gold tested and failed at the 50.0% Fibonacci retracement level at USD1760.00 an ounce on Friday, for the second day in a row. That suggests that US yields will have to move markedly lower this week, or gold rediscovers its haven mojo, for that level to break, opening up further gains.

Federal Reserve Chairman Jerome Powell has injected some nervousness into the market, stating the US economy is at an “inflection point” during a television interview. The US recovery is balanced out by the downside risks of surging Covid-19 cases globally.

Another likely source of tension is US bond yields which rose on Friday after US PPI data printed much higher than expected. If this upward trend continues, gold could be under pressure. The US has three, ten and thirty-year bond auctions this week, and bid-to-cover nerves have risen. The response to these auctions could have a significant impact on the direction of bond prices this week as well as gold.

For now, gold looks set to trade quietly in a USD1730.00 to USD1760.00 range, with bitcoin seemingly the safe-haven asset of choice at the moment. In the meantime, gold remains at the mercy of the US 10-year Treasury yield.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley