Oil recovering, gold seeing light relief

Oil bounces back despite White House plea to OPEC

Oil prices are continuing to recover after a choppy session on Wednesday after the White House attempted to weigh in on OPEC+ output.

Reports yesterday that President Biden wants the group to increase the pace at which it pares back production cuts initially sent crude prices lower, having only just rebounded off its lows earlier this week.

Prices did rebound a little later though, with a softer dollar on the back of the US inflation data contributing to the rebound. Despite the initial knee-jerk reaction, traders may also have come to the conclusion that Biden won’t hold much sway in the groups decision making, even if his comments do perhaps embolden some members that would like production to ramp up faster than the 400,000 barrels every month that was previously agreed.

But those discussions would likely have taken place anyway as the recovery gathered speed and prices remained high. The group is used to the White House attempts to pressure the group after four years of dealing with President Trump. This is nothing new and is unlikely to have any considerable impact on their output targets.

The result is that crude prices remain range-bound, with WTI seeing a broad $65-75 range and Brent $67-77. That range may narrow in the coming weeks but it seems rising delta cases around the world has temporarily put a ceiling on the rally.

Gold enjoying brief relief

Gold is enjoying some light relief after events of the last week saw the yellow metal spiral out of control on Monday.

It has since bounced back, aided by the softer inflation reading on Wednesday and slight easing of US yields and the dollar. The result is it finds itself back around $1,750 where it spent some time back in June.

Unfortunately, this time it’s the wrong side of that support line which is now providing a barrier of resistance to golds recovery. While the inflation data took the pressure off, it doesn’t change much as far as the Fed is concerned. Of course, it could have become much worse if the CPI data had gone the other way, hence the relief rally, but tapering is still coming and I don’t think the data changes anything as far as it is concerned.

Today’s PPI data may get things moving again as gold tries to push back above that $1,750 resistance. A higher than expected number could see it tumble once more though.

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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.