Oil drops, gold rebounds


Crude prices are declining as both supply and demand-side drivers start to turn bearish. The massive IEA crude reserve release plan will provide short-term relief for oil prices but that is also happening as China’s Covid lockdowns are becoming a bigger hit on crude demand. What is also helping drive oil down is the overall risk aversion environment on Wall Street that is sending the dollar higher, which weighs on commodity prices.

It doesn’t look like the EU will be sanctioning Russian oil anytime soon and that suggests oil will need a couple of new catalysts to make a run back towards the recent highs. The oil market remains tight so this weakness might only last a little while longer.  The respective March lows could hold for both Brent crude and WTI crude.

Gold rises as Fed talks tough

Gold is starting to see safe-haven flows as investors sell stocks over fears that the Fed will be much more aggressive with tightening monetary policy.  Geopolitical risks have provided some underlying support for gold and if the next round of sanctions from the EU against Russia are hard-hitting, gold could have a meaningful rally out of its trading range.

Given the Treasury yields have basically doubled in the last several months, gold staying above the USD 1900 level is rather impressive.  As recession concerns brew and the debate of which Fed mistake will be made, gold should start to see steady inflows in the coming months. The Fed will either send rates too high and send this economy into a recession or they will flip-flop again and risk losing credibility.

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