Oil claws back after slide, gold steady

Oil finds its feet after plunging 7%

Oil prices experienced the deepest one-day sell-off since April on Thursday, as rising Covid infections and fresh lockdown restrictions in Europe reminded oil bulls that the battle is not over yet. The new Covid-related restrictions reignited demand concerns, making investors nervous. Oil prices tanked 7% on Thursday – its fifth straight day of losses – shrugging off declining Covid numbers in the US, the world’s largest oil consumer.

However, with Covid vaccine programmes picking up around the world and the resumption of the AstraZeneca jab in Europe, a sustained recovery in demand could be just around the corner.

Despite the sharp weekly sell-off, oil has still gained 15% across the week. It rebounded off the 50 SMA support overnight and has since retaken the key psychological level of USD60.00. For now, the uptrend remains intact, although a move back over the ascending trendline support around 62.70 is needed to convince the bulls to tackle the yearly high.

Looking ahead, the US economic calendar is relatively quiet, leaving the focus squarely on the Baker Hughes rig count later today.

Gold treads water

After slipping lower in the previous session, gold is treading water on Friday. Whilst this week’s surge in yields and pick up in US dollar strength has dragged on the precious metal, this has been offset by gold’s status as an inflation hedge and renewed jitters surrounding US-China relations.

With little in the way of US economic data, the bond market dynamic and geopolitics are likely to remain the key drivers of price movement heading towards the weekend. While gold is set to rise 0.4% across the week, the longer-term outlook for the precious metal remains bearish. Immediate support can be seen at USD1,728 today’s low. Meanwhile, gold bulls will be looking for a move back over USD1,740 to revive upside momentum.

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