Oil edges lower, gold slips

Oil edges lower but Saudi comments are still supportive

Oil prices are a little lower again for a second day after spiking earlier in the week. It’s a little indicative of the mood in the rest of the markets at the moment and the lack of certainty. Prices jumped earlier in the week as traders weighed up the potential for supply disruptions from Libya and Iraq, while the threats of production cuts from Saudi Arabia continued to echo.

They’ve since pulled back amid reports that an OPEC+ cut is not under consideration next week and as broader risk markets turned south. Economic concerns remain and may ensure trade continues to be volatile. API also reported a small inventory build on Tuesday, while a small draw is expected from EIA later today. Given previous comments from Saudi Arabia, any significant pullback from $100 may be challenging.

Gold is on the decline once more

Gold is slipping again on Wednesday, this time aided by the dollar which is rallying once more. Traders are becoming increasingly convinced that the Fed will hike rates by 75 basis points next month, despite the improvement in the inflation data. The message is finally getting through from the Fed and barring another significant improvement in August and/or any sign of slack appearing in the labour market, it may now have to deliver.

It’s worked so hard to convince traders that it must continue tightening aggressively that to then only do so by 50 basis points would seriously undermine trust in its communication and guidance. Policymakers have backed themselves into a corner and may now have to deliver. With $1,730 now broken, attention shifts back to $1,700 and $1,680.

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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