Oil enjoying reprieve, gold coming under pressure

Oil seeing temporary reprieve

Oil prices are rebounding on Tuesday, up around 2% after falling for the last two sessions.

The gains came following the release of Chinese trade data which showed purchases from the world’s largest importer surged last month. The IEA was also optimistic about the recovery from the pandemic in its World Energy Outlook, with the group seeing the global economy rebounding next year, although it’s long term assessment for oil demand was bleak, in line with others.

While both of these have given crude prices some reprieve this morning, it doesn’t change the fact that near-term risks are tilted to the downside. WTI may be holding above $40 for now but I don’t expect that to last.

It was given a bump by Hurricane Delta and strikes in Norway but both of those risks have passed and Libyan output is rising. Heading into a tough period for the global economy when restrictions are going to become more severe, the outlook for oil isn’t great.

Gold hanging in there 

Gold recovered some overnight losses after coming close to testing $1,900 from above but continues to trade slightly lower on the day.

The bullish case for gold has improved in recent days, although it’s far from in the clear. Investors appear to have become more optimistic despite rising global Covid cases and no US stimulus (yet). The gold recovery will depend on that remaining in tact.

The fact that we may not be heading for as messy an election as feared may also be supporting risk appetite, with Biden’s lead in the polls now very significant. And while the J&J vaccine development is unwelcome, there is still a belief that a candidate will be successful this year.

It’s not all doom and gloom which is very good for the longer term prospects of gold, especially against the backdrop of more monetary and fiscal stimulus.

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