Oil rebounds, gold range trades

Oil bounces back in volatile trade

Oil prices are also recovering after Monday’s plunge and are up more than 2% on the day. The sell-off looked over the top, especially against the backdrop of a potential OPEC+ immediate intervention, and a 5% rebound off the lows appears to support that view.

Omicron nerves remain and countries adopting harsher restrictions, circuit-breakers or lockdowns don’t help that. But measures are likely to be temporary thanks to the rapid rollout of boosters in many countries, not to mention the number of people that will contract it if it continues to spread at the rate it has.

And if the impact does last longer, OPEC+ will undoubtedly step in and pause planned output increases. That already looks inevitable in January, if not before.

A tough winter for Europe as energy prices hit records

Europe’s facing an expensive winter as gas and electricity prices hit a record high on the back of reduced natural gas imports from Russia and lower domestic energy production over the next month. The crunch is coming and depleted reserves are going to be drawn down as the weather turns cold. And all at a time when Russia is pushing for the approval of the Nord Stream 2 pipeline and the US and EU are drawing up sanctions in the event of a Russian invasion of Ukraine. Never a dull moment it seems.

More range trading for gold?

Gold is pulling back after surging late last week in a rally that didn’t appear to have an enormous amount of fundamental support. It did briefly break USD 1,800 though before pulling back to trade right in the middle of its range over the last month. The yellow metal appeared to get some bids as yields and the dollar pared gains following last week’s plethora of central bank meetings. I’m not sure that can be sustained but for now, we may have to get used to range-bound trading.

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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.