Oil consolidates, gold holds own

Oil consolidates as we await more data on omicron

Oil prices are down around 2% on Friday, dragged lower as trading becomes more risk-averse at the end of the week. It had rebounded well over the last couple of days but has run into resistance at the upper end of its recent range, around USD 73. We could see further consolidation around USD 70 in the coming sessions as we learn more about omicron, what restrictions it will bring, and whether OPEC+ will react.

The group has put a floor under the price for now, after announcing that adjustments could come at any time depending on the incoming data, but that will only hold so long if restrictions weigh on demand.

Relief for gold despite central banks embarking on tightening cycles

Gold is taking the news that central banks are tightening monetary policy and tackling inflation head-on very well. You would be forgiven for thinking this would be a negative development for the yellow metal and, in the longer term, I expect it will be.

But it’s also a development that was almost entirely expected and priced in. So we may be seeing some profit-taking on the pre-meeting moves which is pulling yields a little lower and weighing on the dollar. This should be a short-term relief move, although that may depend on what the omicron data tells us in the coming weeks. It’s spreading like wildfire here in the UK and other countries appear to having a very similar experience.

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