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Oil stays below USD 100, gold recovers

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Oil holds below USD 100 ahead of the Fed

I’m sure oil traders have their sights set on many of the same events this week, as they try to better grasp the economic threat facing the US and other countries around the world. A recession is the primary downside risk for crude prices and it’s all that’s keeping them below USD 100 in the short term.

A faster path of Fed tightening and disappointing earnings reports from the US this week could trigger further weakness in the oil market although I am sceptical about the scale of the downside risk. The tightness of the oil market cannot be ignored even as recession odds rise. A sustainable break below USD 90 still looks like a big ask and if it does materialise, it will be a bit of a double-edged sword.

Gold recovering but faces big test

Gold is continuing to enjoy a recovery and is set for the third day of gains as yields remain well off their highs. The US 10-year is not far from three-month lows, with 2.75% looking a potentially important level as this is where it has repeatedly rebounded higher from in that time.

That will be interesting to gold traders as it could suggest the recovery is already on borrowed time or is about to take off. We may have to wait for the Fed on Wednesday to see which of the two it’s going to be with the recessionary implications of its actions key to the outcome.

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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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