Oil slide continues, gold range-bound

Oil suffers ahead of difficult Q1 for the global economy

Oil prices are getting pummelled again as sentiment turns south and countries ponder deepening restrictions and lockdowns. There’s certainly a feel here in the UK that households and businesses are preparing for more severe measures and that the government is desperately trying to hold out until after the holidays. Perhaps that feeling is being shared elsewhere and January is shaping up to be a global reset.

None of this bodes well for crude demand in the first quarter of the year. It’s just a question of whether OPEC+ will hold out until the January meeting to pull the trigger or pile further pain on the global economy this year. A pile of coal under the tree for households battling high inflation, higher interest rates, and soaring energy costs. Throw in record pump prices and the growth outlook next year is severely hampered.

Can gold break the range?

Gold’s resurgence last week was short-lived and to be fair, it appeared to be built on pretty shaky foundations. Central banks raising rates to rein in inflation and the dollar attracting haven flows is hardly the recipe for a sustainable rally in the yellow metal. Still, risk aversion at the end of the year could offer some support if it is maintained.

It’s interesting that last week’s heavy calendar didn’t really see gold propel out of its recent ranges. There was some upside momentum but as we saw Friday, there’s still plenty of uncertainty around the upper end of the range and more than enough sellers interested at those levels. Perhaps we’ll see further consolidation into the end of the year unless we can see it build on last week’s momentum and break USD 1,820.

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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.