Oil pulls back, gold hits new lows

Oil enters profit taking territory

We’ve entered into profit taking territory in oil markets, with WTI easing back below $60 before recouping some of those losses. Some may say it’s been a long time coming. A 77% rally in WTI since early November is the kind of returns you’d typically only associate with cryptos, or Tesla.

While the moves are probably justified given what’s happened in that period, a mild correction has been coming. Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week.

With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound, which pushed WTI below $60 at one stage. It may dip below there once more, given how long this market has been.

Gold at its lowest since July

Gold is having a torrid time. Even the pullback we’ve seen in gold the last couple of days couldn’t save it, with higher real yields in the US instead piling the misery on the yellow metal. It fell below $1,760 today, the lowest it’s been since early July, in another sign that its near-term outlook is looking far from bright.

The greenback has been struggling to gather strong upward momentum which may have provided gold some relief but unless the dollar index falls below 90, the outlook for it remains bullish which is bad news for gold. Especially in a rising US yield environment.

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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.