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Oil Skyrockets as OPEC Members Agree on a Deal

By:
Colin First
Published: Dec 1, 2016, 08:29 UTC

Gold prices began to drop once again yesterday as the pressure of the dollar strength continued to weigh on gold and silver. We have been saying that gold

Oil Skyrockets as OPEC Members Agree on a Deal

Gold prices began to drop once again yesterday as the pressure of the dollar strength continued to weigh on gold and silver. We have been saying that gold prices will continue to be weak in the short term and under pressure as we approach the Fed meeting in which a rate hike is expected to be announced. Not only that, we are also looking at possible further hikes in 2017 and with continuing good data from the US, gold prices are bound to be subdued. We also hear reports that China has imposed further curbs on gold imports in order to control capital outflows and with reports saying that India may also be considering a similar action in the near future, this is bound to affect the demand for gold in the short and medium term. These are the reasons why we expect gold prices to be under pressure and with 1205 being a strong resistance for now, we expect the prices to consolidate blow 1200.

As has been the case all this week, oil was the star yesterday as well as the OPEC meeting finally got underway and a deal was finally agreed to. It did not appear so 2 days back but as is usual, on the day of the OPEC meeting, everything seemed to suddenly fall in place and everybody suddenly seem to agree for everything. Iran agreed to cut, Iraq also agreed to cooperate and so did Saudi Arabia and Russian as well. So, finally a deal was made and the OPEC members agreed to cut production by an amount that was as per market expectations. This brought cheer to the entire market as a whole and especially to the oil traders and we saw oil push through $48 and try to break through the strong resistance at $49.

Oil Hourly
Oil Hourly

It has managed to push through $49 as of this writing and it sits above $50 as of this writing. Expect this euphoria to last for the rest of the week atleast and we expect a test of $53 before there is any serious correction in the oil prices. Traders would be well advised to sit out this round and wait for a decent correction (which will eventually come) before they start loading their longs again rather than trying to chase the market and buying oil at peak prices.

Like gold, silver prices also seemed to be under pressure but what we are beginning to believe is that, with all focus on gold and with import curbs being put in by major consumers like India and China, the attention of investors might turn towards silver (as it is free of any curbs and hence will have better demand) and hence, we believe that in the medium term, silver would continue to range trade and be buoyant as compared to gold.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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