Oil pauses, gold stuck at USD 1800

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.

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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