Oil rebounds, gold prices rally

Oil rebounds as OPEC+ prepares defence

Oil prices rebounded strongly on Tuesday and are adding to gains today after reports that Russian Energy Minister Alexander Novak has spoken with the heads of major oil companies to discuss the extension of production cuts.

The move comes as Europe is rapidly going into lockdown again and US Covid-19 cases are surging, increasing the probability of more restrictions there as well. That will take a huge toll on crude demand over the winter just as OPEC+ was planning to reduce cuts to 5.7 million barrels from 7.7 million currently.

A postponement has looked highly likely for weeks and these reports further support that the  Saudi Energy Minister has previously stated that the group will do what it needs to and this is the obvious solution.

WTI rebounded more than 10% following the reports and even managed to fly through USD37. Brent also saw a massive response and climbed back above USD40, where it is currently trading. These are big levels as far as both are concerned and the market may need more details if they’re going to hold.

Gold back in favour, for now

Gold is pushing for a third straight day of gains as it tries to recapture USD1,900. The yellow metal has been weighed down by risk aversion in the market but that has turned more positive so far this week, giving it a boost along the way.

It remains very sensitive to the dollar and could therefore be in for a wild ride over the next couple of days. Major support continues to be USD1,850-1,860 where it has been well protected over the last few months. This continues to look vulnerable though and further bursts of risk aversion could see it come under pressure once again.

It will be interesting to see how the yellow metal responds in the event of a Biden victory, especially if the Democrats take the Senate as well. Not only is gold traditionally a safe haven, it’s an inflation hedge as well and a blue wave would surely mean massive fiscal stimulus, maybe even higher than Pelosi was pushing for in recent negotiations.

To the upside, USD1,930 is key and a break of this level may indicate a big sentiment shift in these markets and be the catalyst for another run towards USD2,000.

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

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