Crude prices tumble, gold vulnerable to more pain

Oil slides on China jitters

Oil prices are dropping fast as crude demand destruction fears grow given China’s COVID situation and the de-risking event happening with US stocks. An imminent embargo on Russian energy seems unlikely as the EU continues to work on gaining Hungary’s approval. ​ A firm dollar has also been dragging down commodities, especially oil prices.

An important story by Javier Blas was circulating today (thank you Julia Fanzeres for sharing), bringing much-needed attention to the recent surge in refined oil products. ​ Everything is getting a lot more expensive and that is leading to crude demand destruction fears. Energy stocks are getting hit the hardest today as everyone is now paying attention to refining margins. ​ ​

Gold

Gold prices are under pressure as investors are dumping stocks and running to the dollar and not bullion. Gold’s worst enemy is the bond market and right now the outlook for Fed policy suggests surging yields will make this a difficult environment for non-interest-bearing gold. ​

If the carnage on Wall Street does not improve, eventually gold will start to see some safe-haven flows, but that isn’t happening just yet. ​ Leading up to Wednesday’s inflation report, the move in the dollar should show some signs of exhaustion and that could provide some relief for gold prices. ​

Gold still looks vulnerable here and if selling pressure sends prices below the USD 1835 level, it could get even uglier. If the dollar hits a short-term top, gold could stabilize here but should find strong resistance around the USD 1920 level. ​ ​

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