Oil dips on China lockdowns and stagflation risks, gold hovers

Crude prices softened as stagflation risks have risen for the US and as China’s reopening hits a major roadblock as Shanghai is expected to lock down seven districts this weekend. ​ The oil market remains very tight, but the short-term crude demand outlook took a bit of a hit today. ​

Whatever weakness emerges for crude will likely be short-lived as this will be one of the busiest driving seasons ever. The pent-up demand for vacation and travel will be front-loaded and demand for crude will be robust even if gas prices make a move towards 6 dollars a gallon.

Gold edges lower after ECB meeting

Gold prices edged lower as global bond yields rallied after the ECB signaled the transition to tightening and as investors anticipate what could be a very hot inflation report. ​ Gold traders just want to see how hot inflation got in May and if that changes market expectations to eye half-point rate increases by the Fed beyond September. ​

Expectations have been steadily growing that inflation will remain scorching hot as the oil price rally remains intact and Corporate America continues to signal price increases will continue to come the consumers’ way. ​

Eventually, global growth concerns will lead to some safe-haven flows for gold but the initial shock of a hot inflation report could be painful for bullion investors. If gold collapses, the USD 1785 to USD 1800 zone should provide some support. In the event that inflation surprisingly eases, sellers will emerge ahead of the USD 1890 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