Oil rallies, gold jumps on dollar weakness

WTI eyeing USD60 club

Oil prices are continuing to climb despite sentiment appearing to fade elsewhere. The softer dollar is offering some support to prices but I think this is still primarily being driven by increasing optimism about the economic outlook as vaccines are rolled out. Early setbacks were likely but progress is being made, as it is with the lockdowns and the proof is in the data.

Caution will still be adopted in the coming months due to the various new variants but this is the final stretch and many countries are well-positioned for a turbo-charged recovery, maybe even a bumper summer as people burst free from their beautiful homes, after having nothing else to spend their money on for the best part of a year.

This should spur a surge in oil demand and kick start the turbo-charged recovery we’re all dreaming of in the hope of preserving jobs and creating some for those less fortunate. It should be a strong second half of the year and oil prices are a reflection of that. Momentum remains with the rally so it may not be long until WTI joins Brent in USD60 territory.

Gold buoyed by dollar pullback

A correction in the dollar has provided some welcome reprieve for gold over the last four days. The jobs report was the catalyst but can’t be credited for the entire move. This was likely building prior to the release. The question is whether this is just a corrective move or something more excited for gold bulls.

At this moment in time, I’m in the former camp (correction). The dollar was on a good trajectory prior to the jobs report and had recently broken the neckline of an inverse head and shoulders which signaled a bullish outlook in the near-term. That hasn’t changed, although a move below 90 in the dollar index may suggest the tide has turned.

As far as gold is concerned, the key level to the upside is USD1,875, which was the peak on two rally attempts in January. A move through here would be a very bullish move and likely coincide with a move below 90 in the dollar index.

Bitcoin hanging on to Tesla gains

It’s not been a bad week for bitcoin. It seems that one thing more powerful than Elon Musk’s Twitter account is the financial power of the company he co-founded and leads. The decision by Tesla to invest USD1.5 billion in bitcoin and announce that it plans to accept bitcoin as payment was a massive win for the crypto crowd. Acceptance in the business and financial community is what they’ve long sought and this ticks both of those boxes.

Of course, it doesn’t mean anyone would actually buy a Tesla with bitcoin for anything more than a PR stunt but let’s ignore the tiny insignificant details. The only thing that matters right now is what it does for price. I’m a little surprised it wasn’t enough to push USD50,000 if I’m honest but it’s surely only a matter of time. There doesn’t appear to be much appetite to sell at this point.

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

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.