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Oil extends losses, gold rally continues

Oil set for large weekly declines

Oil prices are extending losses on Friday, with oil set to decline over 4% this week. The spectacular rally in oil over the past few months appears to be stalling as investors fret over more oil being released into the market. OPEC+ is looking increasingly likely to up output to satisfy rising demand as countries continue to reopen.

Oil demand has been the key driver of oil prices over the past few months as economies reopen and OPEC+ has kept output limited. Demand is expected to increase, with OPEC predicting oil demand to rise to pre-pandemic levels next year. However, output is likely to start playing a more significant role in influencing oil’s prices.

Near term, rising Covid cases are unnerving the oil market. A rise in fuel inventories when the US driving season is supposed to be ramping up has raised a few eyebrows, not least because the July 4th holiday usually sees fuel demand surge.

Gold extends gains for the fourth week

Gold is edging lower on Friday snapping a three-day winning run. Even so,  the precious metal is still set to book gains across the week, its fourth consecutive week of gains. On the one hand, gold is finding support from rising Covid cases and the flight to safety that accompanies the Covid trade. However, mixed signals from the Fed mean that the precious metal has struggled to overcome the key 200-day moving average resistance this week.

On the one hand, Fed Powell continues to reiterate that the economic recovery has a way to go until the Fed could tighten monetary policy. On the other hand, the likes of St Louis Fed President James Bullard sees conditions right to start tapering bond purchases. The US dollar is being guided higher by the hawks which is capping the upside for gold.

Attention will now shift to US retail sales and Michigan consumer confidence data. Weak numbers could work in gold’s favour by dragging on the US dollar.

For a look at all of today’s economic events, please check out our economic calendar at www.marketpulse.com/economic-events/ [1]

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.
Sophie Griffiths

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