Oil softens, inflation hedges gold


Crude prices returned to session lows after the EIA report showed inventories rose by 1.0 million barrels last week.  Gasoline and Distillate inventories posted larger-than-expected declines. Cushing, the biggest storage hub in the US, only posted a decline of 34,000 barrels.  Concerns were growing that Cushing supplies were getting dangerously low.  The small decline in Cushing was not as good as the 234,000 build the API reported yesterday. Refinery utilization rose for a third consecutive week, up to 86.7%.

This EIA crude oil inventory report was overshadowed by mounting political pressure to ease rising energy costs. It seems unlikely crude prices can break above recent highs until energy traders see whatever action will come from the Biden administration. The oil market deficit is firmly in place and that should prevent WTI crude from seeing a significant pullback.

Gold climbs on US inflation

Gold people – All around me feeling this hot hot hot inflation report. (Reference to The Merrymen hit- Feeling hot hot hot). Inflation hitting a 30-year high was music to gold traders’ ears.  The way the gold trade is unfolding is looking mostly bullish. The labor market recovery will likely take longer than a few months for the Fed to say mission accomplished on maximum employment and pricing pressures will continue to trigger inflation-hedges into bullion.  If the Fed makes a policy mistake and has to quickly hike rates and send the economy into a recession, that should be an environment where gold outperforms equities.

Gold burst through the USD 1840 level and now faces tentative resistance at the USD 1900 level. Gold momentum should remain in place if real yields continue to decline.

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