Oil turns positive, Gold stuck in danger zone

Oil

It has been a busy day covering oil markets. The anticipated SPR release day is here, and it certainly did not disappoint. The coordinated SPR release was smaller-than-expected and undoubtedly will be met by less production from OPEC+. The pullback with oil prices is officially over as this oil market deficit will not go away anytime soon. The US may need to consider another SPR release, but even if they talk about it, energy traders know that OPEC+ controls this market.

The focus is now solely back on OPEC+ and no one would be surprised if they scaled down their production plans given the short-term uncertainties to the crude demand outlook and some vengeance for the coordinated tapping of oil reserves.

Gold breaks below 1800

Gold remains in the danger zone after breaking below the USD 1800 level. To make matters worse, gold is struggling as margin pressures grow and some investors are preferring bitcoin as their inflation hedge.

The primary bearish catalyst for gold is the strong move higher with real yields. Fed rate hike expectations are between two and three rate hikes in 2022, but that should be the extent of that steepening positioning.

If gold falls below USD 1758, which would be a lower low, bearish momentum could target the USD 1725 region. Inflation fundamentals still support flows for bullion, but if Wall Street grows more confident that dollar dominance is far from over, gold bears could remain in control a while longer.

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