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Surging US Crude Oil Price Adds to Downward Pressure on Stocks, Bonds and Gold Price

Surging US Crude Oil Price Adds to Downward Pressure on Stocks, Bonds and Gold Price

Martin Essex, MSTA, Analyst

Crude oil prices, news and analysis:

  • The recent surge in the crude oil price looks set to continue.
  • If it does, that will add to the downward pressure on stock prices and the gold price, as well as the upward pressure on US Treasury bond yields and the US Dollar.

Oil price surge not over yet

The strong advance in crude oil prices looks set to continue despite the US crude contract having climbed already from a low at $33.82 on November 1, 2020 to its current level more than double that at around $79 per barrel.

Technically, with the price already at its highest level since November 2014, there is little resistance ahead of the levels above $100 reached in June that year although clearly that is a long-term rather than a short-term target and the price has to break through the $80 “round number” first.

US Crude Oil Price Chart, Weekly Timeframe (October 28, 2013 – October 6, 2021)

Surging US Crude Oil Price Adds to Downward Pressure on Stocks, Bonds and Gold Price

Source: IG (You can click on it for a larger image)

Stocks, bonds and gold price under pressure

Any further rise in the oil price, which has been helped by the OPEC+ decision to stick to its original plan to add 400,000 barrels per day to markets in November despite calls for it boost output, would have a serious impact on many other markets.

The increase has focused attention again on concerns about rising inflation that could lead to tighter monetary policy globally despite slow economic growth. With other commodity prices strengthening too, that’s bad news for stock markets, where the S&P 500, for example, has dropped already from a high above 4,500 to around 4,300 currently and could well ease further.

Similarly, the yield on the US 10-year Treasury note has advanced already from 1.127% in July to 1.557% now, with the 1.6% level in traders’ sights. That’s bad for the gold price, which yields nothing, but good for the US Dollar.

Note incidentally that the latest bout of oil price strength has come despite news of a rise in US oil inventories that suggests slowing demand.

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.