Oil plunges to three-month lows in risk-averse trade
Oil prices are among those risk assets suffering heavy losses today, with Brent and WTI off more than 3% and at their lowest levels in three months. The sell-off in oil was already well underway, with the spread of Covid in China – and elsewhere – and restrictions that have come with it largely behind the reversal in fortune.
WTI is now 17% off its highs and with USD 65 having fallen in the process, worse days may lie ahead. Further support may now lie around USD 60 in WTI and USD 64 in Brent but it could get worse if the Covid situation continues to deteriorate.
Of course, that may depend on OPEC+ and whether recent developments encourage the producers to pare back their taper ambitions in anticipation of lower demand. That seems unlikely in the near-term given that oil prices remain at decent levels, despite the drop.
Gold assumes safe haven role
Gold’s role as a safe haven is looking fairly secure this morning, following the sell-off in risk assets across the board. While flat now on the day, it’s almost 1% off its lows on the back of the stock market dip today. Gold initially came under pressure in the aftermath of the Fed minutes when we saw the dollar rally, following an initial dip.
This perceived hawkishness weighed on gold and saw it pull further back from USD 1,800 where it had previously run into resistance. While an assault on this level hasn’t since been forthcoming, the yellow metal isn’t trading far off these levels once more and further risk aversion once the US joins could see a charge unfold.
A move above here would be quite the psychological victory, with further resistance then coming around USD 1,830. A move above here and things could start to look very promising for gold.
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