Oil slumps over Covid, gold steady

Oil prices dip as outlook worsens

Crude prices declined as unvaccinated countries continue the battle against the delta variant.  The crude demand outlook is getting bombarded with bearish headlines.  The short-term drivers are all negative: Brisbane’s lockdown was extended, the CDC raised South Korea’s travel advisory status one notch to Level 2, infections are spreading across China and the overall theme across much of Asia is for more restrictive measures.  The US has reached the 70% goal of having adults have at least one dose of the COVID-19 vaccine.  The current delta variant wave across unvaccinated states might be peaking in a couple of weeks.

Despite all the bearish sentiment with oil prices, the market is still in deficit, so the downside should be limited.  WTI crude will likely consolidate around the USD 70 level.


Gold is stuck consolidating above the USD 1,800 as investors await to see how the upcoming labor report will impact the Fed’s assessment of how the economy is progressing towards their substantial progress goal.  Despite slumping global bond yields, gold is slightly higher on the session.  It will be difficult to see much conviction is behind bullion if stocks continue to make fresh record highs.  The stock market has become a crowded one-way trade during the summer and that should trigger an excessive reaction once further progress is made in the labor market or if inflation risks grow.

The question for many gold traders is will the Fed taper in September or at the end of the year.  The Fed appears to have locked themselves to an outcome-based approach that should mean tapering will occur on the later side.  The economic data from the US will be good going forward, but as long as the labor market doesn’t improve too quickly, gold should be supported by the Fed.  If gold doesn’t break above the UD 1850 level post-nonfarm payrolls, it could get ugly very fast.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

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.