Oil rallies, gold stalls


Crude prices are stuck in wait-and-see mode until the energy traders have a better handle of what will be the full impact of Hurricane Ida with US production.  Hurricane Ida pummeled Louisiana as a category strength hurricane, forcing over 1.74 million bpd, or 95% of Gulf of Mexico crude and natural gas platforms to shut-in.

Airlines across the board are cutting their schedules and the plateau for air travel is in place.  Southwest announced bookings have slowed down.  Concerns are brewing that we might not see strong holiday demand.

With the oil market still heavily in deficit, expectations are still high for OPEC+ to agree on Wednesday that the cartel can move forward with its planned October hike.  The delta variant peak across much of the Southern states appears to be in place and that should support a steady improvement for reopening by October.  With lots of demand uncertainty, OPEC+ can afford to be patient since peak driving season is behind us, corporate travel is not bouncing back just yet, and with an uncertain holiday travel season outlook.  OPEC+ has built in enough of a cushion that this market is still nowhere near having supply concerns.

WTI crude should find some short-term resistance at the USD 70.50 level, but eventually will make a run at the July high.

Gold prices should rise on dovish Fed

The liquidity wave may last much longer and that should do wonders for gold.  Fixed-income traders are buying ahead of the Fed and that is why Treasury yields will remain grounded.  The playbook for gold is simple; the Fed has made it clear interest rate hikes are far away and that should prevent Treasury yields from taking off, thus denting demand for non-interest-bearing bullion.

Gold prices were unable to benefit from the broad risk-on rally that Fed Chair Powell triggered because demand for stocks were too good.  Gold hit some key technical levels and will likely struggle in the short-term as investors prefer to go overweight with mega-cap tech stocks.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.