Oil pullback ends, gold steadies

Oil 

Energy traders are bullish on oil prices again as China’s COVID situation shows signs of improving and after the dollar eased following a hot inflation report that did little to change short-term Fed rate hiking expectations. The oil market can’t justify oil prices below USD 100 given the potential shock that will occur once the EU is able to move forward with their ban on Russian crude. ​ ​

WTI crude tentatively pared gains after the EIA crude oil inventory report posted a surprisingly large build with stockpiles. ​ This report was full of surprises as US production declined by 100,000 bpd, the first drop since January.

The oil market seems to have made up its mind and it will focus on how tight supplies will be and not the eventual demand destruction that might happen later this year. ​

Gold slides after CPI report

Gold prices tumbled as the dollar surged following a hotter-than-expected inflation report that will likely force the Fed into delivering more tightening than they were initially thinking. ​ Today’s inflation report proves that Fed Chair Powell made a mistake last week when he removed the option of a 75-basis point rate hike at the next policy meeting. The overall takeaway for much of Wall Street however is that the Fed is still poised to deliver consecutive half-point rate increases at the June and July FOMC meetings.

Gold gave up a majority of its gains after the inflation report but found massive support around the USD 1830 level, which is where the 200-day simple moving day resides. ​ Gold was close to showing signs of stabilizing as many investors were hoping for a sharper deceleration of pricing pressures, which was supposed to pave the way for a dollar pullback and a peak with the rally in Treasury yields.

Gold is tentatively holding onto the USD 1830 level and should continue to stabilize, but that may get tested if a steady wave of Fed speak raises market expectations for more aggressive tightening later this year.

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