Oil continues higher on Omicron optimism
Oil prices are continuing to ride the risk wave higher, having been battered by Omicron headlines at times over the last couple of weeks. Crude hit a low after the OPEC+ decision but quickly recovered on the immediate adjustment caveat and since then it has been trading higher.
That could be a sign that OPEC+ has effectively put a floor under the crude price in order to protect its near-term interests but it’s probably more to do with the timing of the Omicron headlines. Don’t get me wrong, oil prices certainly saw some relief following the meeting but traders love to test the limits in these situations and may well still. But the Omicron updates just aren’t allowing for it currently.
There could still be further to run before we potentially see some profit-taking. We’re already seeing a bit in WTI around USD 71.50 but could see more on approach to USD 75, while in Brent, USD 76.50-77.50 is key. Ultimately it comes down to the headlines though and if symptoms prove to be less severe, meaning fewer hospitalisations and fatalities than feared, there’s no reason oil prices can’t head back towards the levels seen for much of November.
Gold choppy ahead of the Fed
It’s been a bit of a choppy session for gold, which continues to trade in relatively tight ranges despite volatility elsewhere in the markets without making headway in either direction. It’s currently a little higher on the day having recovered small losses suffered in the aftermath of the US data. Higher than expected unit labor costs triggered a jump in the dollar which weighed on the yellow metal, not that it lasted for long.
It seems gold is trading with an eye on the Fed next week and an ear to the ground for Omicron news. The next week will be key, after which I expect it to take off in one direction or the other. The Fed’s response will be critical depending on the new variant as it may be faced with inflation and restrictions. Early signs are promising but that’s all it is.
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