Oil prices jump, gold range-trading

Oil prices soar overnight

Nerves broke in oil markets overnight, as the prospect of a European embargo on Russian oil, and reality dawning around Ukraine-Russia negotiations, sent oil prices soaring. Brent crude leapt 7.90% to USD 116.35 a barrel, with WTI rallying 7.0% to USD 112.00 a barrel. In Asia, as with the last few sessions, we have seen buying from the get-go, Brent rising 2.50% to USD 119.20, and WTI rising 2.60% to USD 115.00 a barrel.

 

What is most significant was that oil has continued to rally aggressively even after the EU dismissed the idea of an oil embargo on Russia. It is clear that tensions are rising once again as no progress towards a Ukraine settlement is made. I still believe that Brent crude and WTI will continue to trade in a roughly USD 100.00 to USD 120 range, however. Even the most tenuously positive Ukraine news should see both contracts quickly back below USD 110.00 a barrel.

 

Gold stuck in a range

The one positive to take out of gold’s price action overnight was that despite a rampant US dollar and much firmer US yields across the entire curve, gold still managed to eke out a modest gain, as Ukraine nerves appeared to inspire a bout of haven covering. Gold rose 0.80% to USD 1935.50 an ounce, where it remains in Asia.

 

The problem with haven buying is that it is a fickle beast and disappears as quickly as it emerges. In a global stagflation environment, gold remains one of the more attractive choices in an uninspiring list, but given its proclivity to stage sudden downside corrections, there is probably no need to chase prices at these levels.

 

Gold remains locked in a tight USD 1920.00 to USD 1950.00 an ounce range. A break either way should see another 30 dollars an ounce move. The risks are still skewed to the downside, with critical support at USD 1880.00. Failure signals a deeper correction targeting the USD 1800.00 regions.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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