Oil dips, gold consolidates

Oil slightly pares gains after Monday’s surge

A 7% surge in oil prices on Monday was always going to be difficult to sustain and today’s modest declines are a reflection of that. Whether fueled by the prospect of an EU ban on Russian imports, Chinese lockdowns being less economically restrictive, or the dimming prospects for substantial Saudi output increases; it seems oil traders aren’t willing to give up the gains that easy.

It’s going to be tough for the EU to agree on a ban that isn’t phased in overtime as they’re simply too reliant on Russian oil. In years gone by, maybe. But supplies are too tight and it will take time to source alternative producers. Still, it’s the fact that they’re tight and Russian exports are slipping as a result of sanctions, combined with a lack of willingness to alleviate those pressures by those that can that makes these prices sustainable for now.

Gold should remain well support

We’re continuing to see consolidation in gold in what has been choppy trading conditions over the last week. The yellow metal remains in demand in the current environment but the recovery in risk appetite has softened its appeal.

That said, inflation remains sky-high and the Russian invasion of Ukraine continues. Commodity prices have pulled back but remain extremely elevated and the risks still appear tilted to the upside. Gold is unlikely to fall out of favour but it could continue to consolidate around USD 1,900 as traders protect against the risks that lie ahead.

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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