Oil extends gains, gold up after NFP

Oil rally remains well supported after a brief pullback

Oil prices bounced back strongly on Thursday and are trading back near their highs from earlier in the week. Clearly, energy traders don’t view the crisis as being magically resolved as a result of Putin’s comments on Wednesday. Natural gas is still a little over 10% off its highs but it had made extraordinary gains in the weeks leading up to Wednesday, so this is a little more understandable.

Ultimately, the decision by OPEC+ not to increase output targets at the meeting earlier this week is a major tailwind for the rally and we’re not seeing any loss of momentum at this stage. With the energy crisis contributing an additional 500,000 barrels in daily demand for crude, it’s hard to imagine prices not hitting higher levels.

Gold jumps after jobs report

Gold prices are jumping in the aftermath of the US jobs report. The NFP number was well below expectations and more than offset the large upward revision to August. The reaction of the market was interesting. The dollar fell after the release as US yields declined, which propelled the yellow metal higher, up 1% on the day and not far from USD 1,800. While the dollar and yields reversed those losses, gold largely hung on.

Despite this, markets appear to be fully pricing in a rate hike by December next year, which is unlikely to settle the taper nerves. The jobs report was not so bad that policymakers will u-turn on their plans to taper this year – that was always highly unlikely – and now they’ll just be hoping to avoid a full-blown taper tantrum in the markets. We have seen some nervousness this week but not nearly enough to cast much doubt on the Fed’s decision next month. So far so good.

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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.