China energy buying spree, gold REBOUNDS

Oil consolidates after recent upswing

Crude prices are entering into consolidation mode as energy traders await the OPEC+ meeting on output.  Despite the energy crunch and calls from the Biden administration for a faster increase in output from OPEC+, many traders are anticipating them to stick to the November output plan.  OPEC+ could easily justify delivering more than the gradual 400,000 bpd increase in November and they probably should consider doing so.  OPEC+ has resisted caving into President Biden’s demands over the summer, but this time is different.  The energy crunch could trigger massive volatility and dampen global growth prospects, so OPEC+ should consider a tweak next week.

WTI crude is poised to consolidate here, especially as the strengthening dollar move takes a break.  The USD 70 level should prove to be key support for WTI crude, with the USD 76.70 level providing tentative resistance.

Crude prices turned positive after reports that China ordered top energy officials to secure supplies at all costs.  If China is happily paying any price for energy, this could intensify the energy crunch in Europe.  If this story is refuted, WTI crude could quickly give back these gains, but if it is affirmed, the summer highs will be breached.

Gold

Gold traders are scratching their heads today.  Gold is surging despite Treasury yields slight rise, a slightly weaker dollar as it gives back a tiny bit of this week’s gains, and while Congress drags the debate over spending, infrastructure spending, and the debt ceiling, down to the wire.  Some of gold’s gains are coming from investors seeking protection against the developments in Washington DC, but it is also happening because the gold market may have gotten a bit too short here.  This squeeze could have a little more to go.

If this gold rebound continues, sellers will likely emerge ahead of the USD 1780 level.  If the energy crunch gets worse, that could save gold from further downward pressure in the short-term.  The economic recoveries in Europe and Asia are vulnerable here and fears of USD 90 oil could trigger a massive reversal in interest rate hike expectations.

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.

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