Oil pares gains, gold passes USD 2000

Oil prices remain high but give back huge early gains

Oil prices were up more than 17% at one stage after the open but that has been pared right back as the day has progressed, with Brent now up 1.5% around USD 120 a barrel. In a sign of how ridiculous the situation is right now, that’s coming as quite a relief compared to how bad it was looking at one stage.

The market has shown its vulnerable side now though and it’s quite concerning. On the one hand, without German support, an EU ban on Russian oil imports looks highly unlikely and the pivot away will take years. But then there’s a lot that’s happened in the last couple of weeks that looked highly unlikely a month ago and the situation continues to evolve rapidly.

The risks remain firmly tilted to the upside as far as oil prices are concerned. Downside risks primarily focus around Ukraine and Russia finding common ground and based on the current demands, that does not look likely any time soon. Even a nuclear deal would only provide partial relief compared to Russian supply disruptions and that isn’t even progressing as hoped.

Gold pares gains but record highs are in sight

Gold briefly surpassed USD 2,000 earlier in the day when equity markets were in the depths of despair at the thought of Europe banning Russian oil. Between the inflation and economic consequences of such a move, traders quickly flocked to a dear old friend in gold. As the morning has progressed and nerves have eased, so have gold prices, with the yellow metal now finding itself only marginally higher around USD 1,975.

The situation remains highly uncertain though and markets extremely volatile which should ensure gold remains a firm favourite. All-time highs are not that far away and in the current environment, there’s every chance that we see it surpassed at some point.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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