Oil tumbles on Chinese shutdowns and as new sanctions leave Russian energy alone, gold selloff exaggerated on profit-taking

Oil slides on Ukraine hopes, China lockdowns

Crude prices tumbled after Russia-Ukraine talks led to optimism an end to the war could be in sight and as China lockdowns Shenzhen and Jilin. Energy traders quickly abandoned the crude trade after the next round of EU sanctions spared oil from Russian companies. Oil prices did not stand a chance as Russian crude exports still seem protected and on fears the short-term crude demand outlook will take a hit as China sticks to the ‘zero-COVID policy’.

The oil market still remains very tight and while optimism grows that a huge risk to the global economy could be removed, that won’t change short-term crude supply risk, so a pullback towards the mid-USD 90s is not yet warranted.

Gold drops ahead of Fed meeting

Gold prices got hit with an uppercut as geopolitical tensions somewhat eased and as investors brace for the beginning of Fed tightening later this week.  Gold is a tricky trade right now and could be subject to further profit-taking as Wall Street tries to get a better handle on how high the Fed will take rates this year.  Expectations are for somewhere between 6-7 rate hikes but the risk for more remains elevated until we see a confirmed de-escalation with the war in Ukraine, elevated commodities prices will continue to unleash widespread price increases going into the summer.

Gold selling could target the USD 1930 an ounce level, but that should be a level where buyers emerge.  A quick resolution with geopolitical tensions seems unlikely and while the Fed will show they are tackling inflation, the Fed is not in a position to make aggressive calls on tightening until they have a better handle of the situation.

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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