Economic fears slow rally in oil
Oil prices are only marginally higher at the start of the week as Europe’s failure to agree on a ban on Russian oil and economic fears offset the Shanghai reopening. Hungary is still holding out against the deal but the bloc is confident that it will get over the line. Whether it happens in time to have an actual impact is another thing.
The reopening of Shanghai is a bullish development for oil but recession fears could be stopping prices from rallying much higher. The cost-of-living crisis has arrived and higher oil prices will further exacerbate the pain on household budgets and eventually weigh on demand.
Gold higher as USD pares gains
Gold is continuing to recover on Monday, although it has given back the bulk of its gains from earlier in the session. It’s now trading around USD 1,850 after peaking around USD 1,865, still a little higher on the day. Gold has performed well over the last week as interest rate anxiety has been replaced by recession fears, lowering yields and forcing the dollar lower.
That has continued today, with the dollar off around 1% and allowing for gold to continue its recovery. Gold may be able to build on recent momentum in the short-term but I’m not convinced it’s a good environment for it beyond that. Much higher rates are coming and that has been weighing on the yellow metal over the last month.
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