Oil Continues Rise, Gold Finds Support

Fundamental analysis of Forex market

Oil rally continues

Oil prices are continuing to surge, with Brent crude now closing in on $80 and WTI perhaps not too far behind it.

The global energy crisis could see demand for crude rise if the northern hemisphere experiences a cold winter, with many countries not equipped to cope.

If momentum is sustained, pressure will grow on OPEC+ to speed up the pace that it increases output, after a historic production cut early in the pandemic.

Plans to increase production by 400,000 barrels per day, each month, will see output return to normal by the end of next year but recent events may require the group to pick up the pace.

The last thing the global economy needs going into an uncertain winter period is a fuel crisis to top everything off. Producers may not rush into a decision though, with some potentially comfortable with prices at these levels and others wanting to see if further restrictions accompany Covid surges that weigh on demand.

Gold finding support after Fed blow

Gold is making small gains at the start of the week after once again finding support around $1,740 late last week.

The Fed’s insistence that tapering is still the aim this year and a couple more dots suggesting a rate hike late next year could be on the cards dealt a heavy blow to gold prices last week and the outlook remains challenging if policymakers don’t change course.

With downside momentum seemingly slowing, gold could see some reprieve in the near-term but the broader outlook isn’t great. Inflation is typically part of the bullish case for gold but it’s very much working against it at the moment as it pushes central banks towards the stimulus exit doors.

A significant uptick could see attitudes change. but for now, lower inflation and more central bank stimulus is seemingly more favourable for the yellow metal.