Oil rally fizzles, gold prices fall

Oil

Crude prices turned negative after both USD 80 oil triggered some profit-taking and a surge in Treasury yields delivered a stronger dollar.  The dollar rally could extend as safe-haven flows appear to be the dominant trade since Washington shows no signs in ending the budget stalemate.

Oil’s six-day rally was not meant to be, in fact it became a double-top pattern for some energy traders.  WTI crude hit session lows after OPEC Secretary-General Barkindo highlighted that the oil demand recovery will continue, but it may be slow and bumpy.

Oil’s fundamentals continue to support much higher prices, so today’s weakness might not last too long.

Gold drops as US dollar rises

Gold is having a bad day, actually it has been a terrible month.  Treasury yield curve steepening is driving the dollar higher and dampening demand for bullion.  The 10-year Treasury has gone from 1.30% to over 1.50% in just under a week as this reset of inflation expectations wreaks havoc for gold traders.

Rubbing salt in gold’s wound is that it is not attracting any safe-haven flows as risk aversion accelerates with the S&P 500 having its worst outing since May, the Nasdaq’s worst performance since March, and as the Dow turns negative for the quarter.

If global bond yields continue to rise, gold seems vulnerable to a test of the USD1700 level.

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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