Oil dips after US inflation, gold rises

Recession fears push oil lower

Oil prices edged lower on Friday as US inflation eroded hopes of a Fed-derived soft landing. The falls were modest though, highlighting that despite economic slowdown nerves, the supply/demand situation remains as stagflationary tight as ever. Brent crude finished 0.83% lower at USD 121.85 a barrel, and WTI fell just 1.0% to USD 121.25 a barrel.

In Asia, oil has fallen again, this time after mass testing in Beijing and Shanghai over the weekend raised fears that lockdowns would return, diminishing local demand. Brent crude and WTI have eased by 1.30% to USD 120.25 and USD 118.90 a barrel respectively, near Friday’s intraday lows.

Unless US markets move to price in a full-blown recession, and China does actually hit the lockdown button again, it is unlikely that we see an extended sell-off in oil prices. With OPEC+ compliance approaching 200% and the continuing squeeze on refined products such as diesel around the globe, the supply/demand dynamics remain supportive of prices.

In the near term, Brent crude has support at USD 119.50 and USD 118.50, with resistance at USD 122.00 and USD 124.40 a barrel. Brent crude has traced out four recent daily highs just above USD 124.00, suggesting further gains will be challenging, even if the downside is limited. WTI has support at USD 118.00 and USD 117.00 a barrel, with resistance at USD 120.25 and USD 123.00 a barrel.

Gold rises on haven buying

Gold had an interesting session on Friday, shrugging off higher US yields and a powerful US dollar rally to record a 1.28% gain to USD 1871.60 an ounce. Haven buying as equities and cryptos melted down lifted gold as investors parked cash in the yellow metal to hedge weekend risk.

With the new week starting, there unfortunately for gold bugs, seems to be a business as usual air around gold’s price action today. Gold has fallen by 0.46% in Asia to USD 1863.10 an ounce, as the US dollar rally continues. Unfortunately, gold does have a habit of teasing gold investors, only to dash hopes with whipsaw corrections lower. I would really like to see another session or two of gold defying a stronger US dollar before erring to the bullish side after a month of range trading.

With that in mind, I do not discount a continued correction lower and in the bigger picture, gold remains stuck in a USD 1830.00 to USD 1880.00 range with its 100-day moving average just above USD 1890.00 an ounce. Realistically, the technical picture requires a close or two above USD 1900.00 an ounce to suggest that gold is on the move once again.

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