Oil declines, gold rebounds

Oil goes for a wild ride

Oil edged lower after a wild session as energy traders became worried that inflationary pressures will only get worse as this war continues and that will lead to crude demand destruction.  After another hot inflation report, many investors on Wall Street are growing concerned that stagflation risks could derail the economy later this year.

Adding to the pressure on crude prices is the distant possibility that OPEC+ could be serious in their contemplation of boosting oil output.  Regardless, US production is expected to rise and many oil-importing nations will continue to tap stockpiles as the global energy crisis intensifies.  There is too much uncertainty about who will be buying Russian crude and how much over the short-term.  WTI crude seems like it could start to trade in a widening range between the USD 100 to the USD 116 price levels.

Gold

Gold prices rebounded after high-level talks between Russia and Ukraine did not yield a stop in fighting.  Wall Street is going back into risk aversion mode as Russia seems poised to continue to move forward with its attack on Ukraine.

Gold prices appeared to be anchored around the USD 2000 level but could push higher if Wall Street becomes even more skeptical that a cease-fire between Russia and Ukraine seems far away from happening.  Gold has strong support at the USD 1975 level and tentative resistance at the USD 2050 region.

The latest inflation report did not do much for gold today but serves as a reminder that stagflation risks remain and that growth concerns will eventually lead to safe-haven flows into bullion.

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