A rollercoaster week for oil prices has WTI crude recovering almost half of the 15% plunge that took place over the past two prior weeks. Crude prices are slightly softer as energy traders await further developments with COVID-19 restrictions and if the demand outlook continues to improve across the US and Europe. Oil prices seem poised to head higher given US production is close to peaking and since OPEC+’s gradual plan to increase output will leave this market with a huge demand deficit.
Gold dips as risk sentiment rises
Gold is softer as risk appetite runs wild, with the S&P 500 index making a fresh intraday record high following robust earnings and as Treasury yields appear poised to close near this week’s high.
Gold will ultimately benefit from the stimulus trade which got another vote of confidence from the ECB this week. The ECB signed off on 3 conditions to raise interest rates, which means we might not see them tighten in more than a few years, which implies QE will last much longer. The next big catalyst for gold will be the Fed’s policy decision on Wednesday. The Fed will provide more signs on when and how they will start tapering asset purchases, but likely refrain from delivering and hard commitments. A formal announcement of tapering does not seem likely to happen at Jackson Hole anymore and that should keep gold prices supported next week.
Gold is likely to continue to trade around the USD 1800 level leading up to the FOMC decision.
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