Oil around three-year highs
Oil prices are trading back around levels last seen in late 2018, with crude getting a lift from the improvement in risk appetite and the apparent easing of concerns around Evergrande and China. With operations in the Gulf coming back on line and oil getting an extra lift on the back of sky-high gas prices, as countries head into the winter facing an energy crisis, the outlook continues to look bullish.
We may soon hear the White House pushing once more for higher OPEC+ output. And it will probably fall on deaf ears again. Especially with the economic outlook in the remainder of this year still highly uncertain.
Gold facing a tricky period
It hasn’t been the best couple of days for gold, with the Fed’s plans to taper and maybe hike next year not exactly conducive with a strong rally in the yellow metal.
It’s quite impressive just how relaxed investors are with the situation. On the taper discussion, the reaction is probably a testament to the Fed’s effective and transparent communication over a prolonged period. While some may argue that taking this action during such an uncertain period is needlessly risky, there is no arguing that the Fed hasn’t been clear and consistent.
Ultimately, there weren’t many surprises at all from the Fed on Wednesday, with support growing a little for a rate hike late next year, assuming the economy continues to recover. The message is clear. Emergency stimulus is no longer necessary and the weaning process will begin very soon.
Gold was on a decent run going into the meeting but it quickly failed around USD 1,780 – prior support – before tumbling once more. The near-term outlook isn’t great, with the next tests coming around USD 1,740 and USD 1,700.
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