OIL EDGES LOWER ON COMPLICATED ECONOMIC OUTLOOK
Oil prices are edging lower again today after closing last week towards the lower end of its weekly range.
After breaking through key support earlier in the week, the sell-off quickly accelerated and the lack of significant profit taking since suggests further pain lies ahead. The outlook for crude prices remains complicated by the stricter measures being imposed in various countries and the spike in COVID cases around the world.
And this is before the winter period that many experts have been dreading for months. Any hope of oil demand returning close to pre-pandemic levels before the end of the year may have been very premature and OPEC+ and others may have to be very careful when turning on the taps again.
GOLD STEADY AHEAD OF THE FED
Gold has steadied in the middle of its $1,900-2,000 range, buoyed a little by the fact that the dollar has struggled to build find momentum after breaking higher last week.
This temporary setback for the dollar – and reprieve for gold – may not last though with a corrective move in both cases still looking plausible in the near future. Longer term, the bullish case for gold remains intact for all the normal reasons (dollar downtrend, unprecedented stimulus, suppressed yields etc).
Perhaps the near term is being impacted by the Fed meeting this week, traders sitting on the fence in the run up to it. In theory, the Fed enabled itself to at least signal more easing at Jackson Hole, having amended its framework to allow for an inflation overshoot.
Should it pass up the opportunity, traders may reassess just how significant a difference such a policy change will make.