Oil edges lower, gold rallies

Oil pares gains but remains well supported

Oil prices are a little lower today after spiking on Friday following reports of a potential Russian invasion. Crude prices are inching ever closer to USD 100, something that looked very possible prior to Ukraine risk-premiums being priced in. That has obviously accelerated the move and we may not have to wait long if the claims turn out to be accurate.

The fact remains that the oil market is extremely tight at the moment, as the IEA alluded to late last week. Demand growth is strong and OPEC+ continues to fail to hit output targets. Rather than getting closer, the gap is even widening. We don’t need OPEC+ to expand targets; it’s time for unilateral action from Saudi Arabia which reportedly has the capacity to alleviate the pressures. Until then, hope lies with a nuclear deal between the US and Iran. In the absence of either, triple-figure oil looks very possible.

Three months high for gold

Gold is rallying again at the start of the week as traders are once again drawn to the safe haven and inflation hedge in times of need. The yellow metal surged late on Friday and remains well supported, despite seeing some profit-taking earlier on today.

The latest developments in Ukraine have seen gold smash through USD 1,850 resistance and it’s now closing in on the mid-November highs around USD 1,875. If the situation does deteriorate as feared, we could see gold remain a favourite, with USD 1,900 the next test. Especially if oil and gas prices continue to rally on the fear that conflict will further squeeze supplies in an already tight market, fueling more inflation.

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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