Oil rallies alongside risk, gold surges

Oil climbs as risk sentiment rises

Oil prices are surging as risk appetite runs wild following disappointing economic data that solidifies the view that the Fed won’t be slowing down its ultra-accommodative stance anytime soon.  The growth story is getting stretched into 2022 and this is very positive for risk appetite.  Energy traders are anticipating further price increases from Saudi Arabia and that might prove too aggressive given the short-term impact to demand over the Delta variant.  The oil market remains very tight but some vaccine requirements might disrupt the short-term demand story as still around one-third of the country seems unlikely to get vaccinated.  As more businesses start requiring masks again, that could lead to a slower demand recovery.

With the supply side somewhat under control across OPEC+ and non-OPEC producers, crude prices could still reach USD 80 over the next couple of months if the demand outlook doesn’t take any fresh hits.

Gold

Gold prices are surging after a wrath of US economic data painted a picture of a prolonged economic recovery that will likely be accompanied with a Fed that will not be abandoning its ultra-accommodative policies anytime soon. a downside surprise in both GDP and jobless claims justified the Fed’s dovish stance.  The softness in today’s GDP data was mainly attributed to the decrease with inventories.

The Fed won’t be changing its game plan anytime soon and that should provide a short-term bullish environment for bullion.  Gold will now be able to stomach progress on taper conditions and even a slowly steepening of the Treasury curve.  For the economy to reach the Fed’s goal of substantial progress in the labor market, the economy will need to have a couple of back-to-back million-plus jobs created nonfarm payroll reports.

If gold can clear the USD1850 resistance level, technical buying could support a strong rally back towards USD 1900.

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

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