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Oil falls stocks lower, gold lower on strong USD

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Oil

Crude prices and US stocks appear to be in lock-step ahead of Friday’s inflation data.  Omicron uncertainty and concerns of weakening crude demand snapped a three-day rally in oil prices. Information on Omicron has been fluid, with earlier in the week one study showed a third Pfizer dose neutralized the Omicron variant. The latest news showed that the Omicron variant is 4.2 times more transmissible than the delta variant. For the unvaccinated population, Omicron may be a fast wave and could support the idea that the short-term hit to crude demand will be quick and fast.

Besides incremental Omicron updates, the rest of the week is all about two things: a potentially hotter-than-expected US inflation report that might send the dollar higher and the weekly Baker Hughes rig count which should show more rigs are coming online.

WTI crude should find initial support at the USD 70 handle and if that holds by the end of the week, the recent rebound may continue.

Gold eyes inflation report

A strong dollar has gold prices declining towards the lower boundaries of this week’s trading range.  Gold could have a make-or-break moment following the US inflation report, which could seal the fate for an accelerated tapering of asset purchases by the Fed. If tomorrow’s inflation report delivers a 7-handle, the Fed will likely double its tapering pace which could suggest a first-rate hike will fully be priced in for the May 4th policy meeting.

Gold traders are awaiting a big move and probably will wait until gold is clearly free from the USD 1760 to USD 1800 trading range. Gold’s longer-term bullish outlook remains intact, especially now that some people are talking about a recession in 2023 due to an accelerated tightening cycle by the Fed.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. 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. Prior to OANDA 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, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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