Oil prices dip, gold rally pauses

Oil pullback losing momentum

Oil prices are falling again on Monday, although the pullback does appear to be losing momentum as it approaches the lows from a couple of weeks ago. The correction has been partially attributed to the prospect of US President Joe Biden releasing oil from the SPR. While I’m sure Biden will be happy with this result, I’m not convinced it’s a threat he wants to follow through on. Not at these levels. It’s win-win in that sense. For now, at least.

Ultimately prices remain well supported as there’s little chance of OPEC+ raising output faster, especially if – as UAE energy minister Suhail al-Mazrouei claimed today – the group expects the market to return to surplus in the first quarter of 2022. With US shale not the force it was prior to the pandemic as focus shifted to debt and shareholder repayments this year, we may have to get used to prices at these elevated levels.

Is gold’s winning streak coming to an end?

Gold prices are pulling back a little at the start of the week, threatening to bring an end to the seven-day winning streak for the yellow metal. It’s been quite a run for gold, which has soared as inflation indicators have continued to rise and become more widespread. This, in turn, has forced traders to price in more rate hikes even as central banks push back against it.

Gold has become popular despite higher yields and a stronger dollar, as inflation-adjusted yields remain at their lows. It’s also been seeing some love for its role as an inflation hedge, as we saw in the aftermath of the US CPI data last week. If policymakers continue to stick to the transitory line, gold could continue to see support. Of course, the dot plot next month may be a big giveaway on that front.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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

Senior Market Analyst, UK & EMEA at OANDA
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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