Oil, gold prices ease

Oil recovers well but faces major resistance

Oil prices are easing slightly today after an impressive rally since the OPEC+ meeting last week. Brent appears to have run into some resistance around the lower end of USD 76.50-77.50 which could be a big obstacle to the upside. This was a big area of support in late September and again in late November and a move back above here could set the stage for a push back above USD 80.

That may be tough in the near term with so much still unknown about the Omicron variant and governments in discussions about appropriate restrictions to slow the rapid spread. But clearly, OPEC+ warnings have not fallen on deaf ears and should the variant not prove too bad, crude prices could remain well supported.

Gold edges off lows but remains vulnerable

Gold is slightly lower on the day as it continues to struggle to generate any upside momentum whatsoever. It recently held onto the mid-October and November lows but continues to face significant resistance to the upside. Omicron uncertainty didn’t help the yellow metal despite its safe-haven reputation, which begs the question, what will drag it higher?

Central banks are unlikely to flood the market with liquidity again if we see severe restrictions or lockdowns as it battles uncomfortably high and widespread inflation. But they may take a more patient approach in order to remain as accommodative as possible, which could still be viewed as an inflation risk and drive more hedge flows in the coming weeks. If not, we could see the ground below become very shaky.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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