Oil falls on China PMIs, gold dips

Oil lower after China PMIs

Oil prices have slipped more than 1% on Monday on the back of the weaker than expected Chinese PMI readings. A slowdown in the world’s second-largest economy would be a big blow for the region at a time when numerous countries are struggling to get to grips with the latest Covid wave.

Prices have recovered some of their earlier losses and remain not far off their highs. Part of today’s declines may simply be a fact of timing, with the Chinese data coming at a time when you would expect to see some profit-taking kicking in. The numbers from Europe are very encouraging and similarly strong data is expected from the US.

So despite the PMIs coming from China and other parts of Asia, oil prices are likely to remain well supported going into the end of the year. The major risks to this are a new vaccine-resistant variant and US supply ramping up dramatically as a result of these higher prices.

In the US, the introduction of a 1 trillion dollar infrastructure bill in the Senate may be giving sentiment a bit of a bump at the start of the week. There is still some way to go but this was an important step towards some badly-needed investment in US infrastructure.

Gold slips but remains technically bullish

Gold prices have slipped back towards where they traded for most of July. This is despite US yields and the dollar slipping back a little, which makes me think this move is more technically driven, than being a more bearish signal.

The yellow metal ran into resistance just above USD 1,830, around the same area it struggled a couple of weeks earlier. As long as it holds above USD 1,790, the outlook looks favourable. A move above that resistance zone could give the yellow metal a bit of a kick, with USD 1,850 then being key above here.

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Craig Erlam

Craig Erlam

Former 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.