Oil pares losses, gold rally pauses

Crude prices initially declined as pressure grows for the White House to tap the SPR. US energy secretary Granholm reiterated President Biden is considering limited tools he has to address high gasoline prices. Over the weekend, Senate Majority Leader Schumer pushed Biden to release oil from the Strategic Petroleum Reserve.

The crude demand outlook is not getting any favors from Europe as many countries consider fresh restrictive measures. France posted disappointing road fuel sales that show gasoline and diesel sales are below levels seen two years ago.

WTI crude pared losses after the EIA forecasted Permian oil output to hit a record high next month.  Other regions are still nowhere near pre-pandemic levels, so this increase from the Permian will offer little relief to elevated oil prices.

The oil market deficit is not going away even as Permian output hits records and that should limit the downward pressure hitting crude prices.

Gold in wait-and-see mode

Gold’s one-way move higher since the November 3rd FOMC policy decision has run out of steam. Gold prices are entering wait-and-see mode as investors await any fresh signals that inflation will last hotter for longer. Better-than-expected retail sales and industrial production data from China dented appeal for safe-havens but continued upward pressure with emerging EU and Nordic inflation kept the need for inflation hedges.

The inflation story will get a massive update after the retail sales report shows whether the consumer continues to handle another wave of pricing pressures. Gold will need a fresh catalyst to make a run towards the US 1900 level.

A wrath of Fed speak will likely see the doves defend the transitory thesis, which could slow the move higher with bullion.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.