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Oil pulls back, gold licks wounds

Oil eases off highs

Oil prices are pulling back a little at the end of the week after coming within a whisker of summer highs on Wednesday. We’re clearly seeing some profit-taking kicking in on approach to those highs, with the restarting of operations in the Gulf of Mexico and the dollar rally further backing the move.

Any correction in price could see some support arrive around USD 70 in WTI, where it finally broke back above earlier this week. There still appears plenty of momentum in the rally which could keep dip buyers interested. There’s also a couple more months of Hurricane season so further disruption in the Gulf is likely.

Gold stable after plunge

Gold took a pummeling on Thursday. A break of key support around USD 1,780 followed by stronger US retail sales and manufacturing data was a hammer blow for the yellow metal which rapidly fell below USD 1,750 before paring some of those losses. It’s making minor gains today but struggling to even maintain them.

It seems traders view the risks next week as being tilted to the downside for gold and have started pricing it in early. It’s not an outrageous assumption given the commentary we had from policymakers ahead of the blackout period, especially when combined with yesterday’s data, but it may be a little premature. Next week should clear up some of the confusion as the Fed commentary we’ve had recently doesn’t seem to match the mood in the markets.

I imagine the Fed will want to remain committed to its desire to taper later this year but if they do, I expect there’ll be plenty of dovish caveats designed to keep the markets on board. And this may spare gold in the short term as we wait to see if the downside risks materialise.

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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