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 15^th 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.

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.