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Crude prices tumble, gold vulnerable to more pain

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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. ​ ​

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. 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. Prior to OANDA 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, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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