Oil rebounds, gold rallies ahead of Fed

Oil bounces back but China remains a risk

The improvement we’ve seen in risk appetite has helped lift oil prices after they slipped back this week. Chinese growth concerns are naturally a big downside risk for crude prices, with it being the world’s largest importer. With sentiment much improved following the PBOC’s cash injection and Evergrande reaching an agreement on an interest payment in yuan-denominated bonds, oil has taken a turn for the better.

The rebound was also aided by a 6.1 million inventory draw, reported by API on Tuesday. Although part of this has already been given back after EIA reported only a 3.5 million decline, in line with previous expectations.

Still, oil prices look healthy once more with WTI seeing strong support around USD 70 over the last couple of days. That said, it will remain sensitive to headlines coming from China in the coming days and I’m sure there will be plenty, including an update on the coupon due on its dollar-denominated bond, also due Thursday.

Gold rallies ahead of the Fed

The dollar has softened a little over the last couple of days which has provided some reprieve for gold, which has rebounded off its lows earlier in the week. I’m not sure how much better it will get for the yellow metal though unless the Fed has a dovish surprise in store for the markets, which would weigh heavily on the dollar and push yields lower.

Gold is seeing resistance currently around USD 1,780, where it saw strong support late-August and early September, before smashing through a little under a week ago. A rotation off this level would be a very bearish signal for the yellow metal and could see focus switch back towards USD 1,740 and maybe even USD 1,700.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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