Oil volatile, gold down on Powell nod

Oil

Crude prices did an about-face after OPEC+ hinted they could adjust their output increase plan if the US is successful in getting many countries to tap their respective strategic petroleum reserves. Earlier, oil prices were declining as the energy market was bracing for a larger-than-expected release of global strategic petroleum reserves and as Germany struggled with the latest surge of COVID.  Japan and India are looking to join the Americans and Chinese in tackling the recent surge in oil prices that has happened throughout the majority of the year.

OPEC+ is pushing back on this coordinated effort which is being led by the US to thwart surging energy costs as the global economic recovery stumbles to runaway inflation fears.

WTI crude will remain a volatile trade, but much of the downward move has already happened. An official US SPR announcement could happen as early as tomorrow and energy traders will look to see if that marks the bottom of the recent pullback.

Gold falls as Powell gets nod

Gold is getting punished as stocks hit fresh record highs and the dollar soars after President Biden selected Jerome Powell for a second term as Fed Chair. Gold’s weakness is noticeable and conveniently right when ETF investors finally decided they needed inflation-hedges. The move higher with real yields has accelerated some of gold’s weakness, but it is way too early for investors thinking this is the beginning of a sustained trend.

Gold has massive support around the USD 1800 level and with a shortened trading week, it could consolidate between USD 1800 and USD 1850 leading up to the December 15th FOMC policy meeting. Faster tapering and a rate hike already being priced in for the June policy meeting has been kryptonite for gold.

This is not the end of the gold trade, but there could be further short-term pain.

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