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Oil holds gains, gold nearing breakout

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Oil bullish on stimulus and output cut delay

Oil prices are steady after pulling off their recent highs, as OPEC+ passed on the opportunity to signal a willingness to delay two million barrels of planned increases from January, as part of its tapering of record cuts earlier this year.

The cuts still stand at 7.7 million barrels but with demand struggling to recover and Europe and North America in the early stages of a second wave of Covid, traders are seemingly confident that increases won’t go ahead as planned.

A US stimulus deal would probably give oil prices a temporary kick higher as well, given the risk to the economy of an agreement not being reached. But broadly speaking, the risks still remain tilted to the downside as the second wave hits. OPEC+ holds the key but it may take a move below the early Autumn lows to pique their interest.

A breakout is near

Gold is continuing to consolidate around $1,900 and the walls are continuing to close in.

A breakout doesn’t look far away and, in the near-term at least, whether or not a stimulus deal is struck looks the most likely catalyst for a breakout in either direction. The medium term outlook remains bullish but I remain skeptical about the ability of Congress to pass a spending bill so we may see another test below first.

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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.
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