Crude tumbles, gold steadies

Oil declines as inflation concerns persist

Crude prices have steadily declined as investors hit the pause button with super commodity cycle trade.  Inflationary fears have unnerved some investors into taking some profit off the table with their energy trades. The sharp jump in consumer price inflation was echoed by the Producer Price Index, which showed its largest annual increase since record tracking began in 2010.

The drama from the Colonial Pipeline is quickly fading as service returns today, with many focusing on reports that European hackers were able to get USD5 million.  The impact appears to be minimal fuel shortages and lines at gas stations along the East Coast.

WTI crude prices have been stuck near the upper boundaries of its recent trading range, so it might not take much to see a bigger drop.  WTI’s initial support lies at the USD62.62 level, followed by the USD58.50 region.

Gold

Gold prices steadied after another hotter-than forecasted inflation report for producers failed to send Treasury yields higher.  Risk appetite returned today and that was good news for gold investors.  Gold is in a weird spot right because Wall Street is divided over inflation.  Fed officials will not budge from their ultra-accommodative stance anytime soon and a couple of hotter inflation readings will not be enough to have them change their belief that this spike in prices will pass.

The argument that the surge in prices will be transitory still holds up given how depressed price levels got during the pandemic.  The Fed will remain gold’s best friend and that should eventually allow prices to attempt to break above massive resistance that lies around the USD1,855 level.

Gold’s pullback from a surge in US inflation might already be over.  The next move for bullion will likely be packed with momentum so the next 24 hours will be crucial.  If selling pressure wins out, the USD1,800 level will likely be defended.

This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya