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Oil rally loses steam, gold awaits Powell speech

Oil stabilises after a bumper start to the week

Oil prices have seen their resurgence grind to a halt on Wednesday, following a remarkable start to the week.

A 15% decline between early July and late August has been followed by a 10% rally this week alone as new Chinese Covid cases fell to zero, putting at ease concerns about more severe restrictions and lower growth.

The rally began to falter on Tuesday as API reported a weekly draw of only 1.622 million barrels, a little short of expectations. Prices did recover early in Europe but once again ran into a wall as we moved into the US session. This came around the 50% retracement level – July highs to August lows – and shortly after the durable goods orders release.

What we’re probably seeing is just a bit of profit-taking in choppy trading, with the 50% level providing a perfect opportunity. We have seen a small bounce after EIA reported a larger drawdown of three million barrels but prices are still largely flat on the day.

Gold rally hangs on Powell comments

Gold is also seeing some profit-taking after a bumper couple of weeks.

The yellow metal managed to break above $1,800 but failed to generate any significant momentum. There was plenty of resistance just above here, with gold rotating off the 200-day SMA before heading lower.

A move above here would have been a very bullish signal and could still come if Powell fails to signal that a taper is likely this year. While the 200-day SMA was the turning point this time, this also falls around key Fibonacci levels and a significant area of resistance over the last couple of months. A move above $1,833 could be very bullish.

Taper talk around the September decision could kill hopes of $1,800 before it even had a chance at a serious run above it. Perhaps it’s this fear that’s triggering the profit-taking we’re seeing in gold after a very good run in recent weeks. The yellow metal has rallied roughly 6% since the flash crash, not a bad return considering how bad things were looking at that point.

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.

Craig Erlam

Craig Erlam [4]

Senior Market Analyst, UK & EMEA at OANDA [5]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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