Oil falls over Moderna, gold drops on Powell

Oil

Crude prices got hit with a one-two punch from Moderna CEO’s concern over the current MRNA vaccines effectiveness with Omicron and after the Fed sent the dollar higher and brought forward rate hike expectations.  Energy traders will be stuck in wait-and-see mode over the next couple of weeks until a clearer picture emerges over how bad lockdowns and travel restrictions get with this new COVID variant.  The short-term crude demand outlook is a giant question mark and that has many traders turning bearish with crude prices. All eyes will be on OPEC+ for the rest of the week.  OPEC+ will likely pause production increases in response to the globally coordinated strategic petroleum releases and as the crude demand outlook took a big hit from the latest COVID jitters.

Gold falls as Powell turns hawkish

Gold prices got punished after both Fed Chair Powell turned hawk and signaled a faster taper and on optimism after reports that many of the Omicron cases across Europe have been mild or asymptomatic. Rate hike expectations are once again increasing but the real yields are not. The inflation risk is still the biggest risk on the table and that is why the Treasury curve is flattening.

Gold will eventually stabilize once it gets through this tough period of stimulus withdrawal. The risks of a Fed policy mistake are growing and given what the long-end of the curve is doing, gold might start seeing support fairly soon.

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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