Oil stumbles on recession worries, gold awaits FOMC decision

Oil

Mounting recession worries are currently trumping how tight the physical crude market remains. ​ Crude prices tumbled after countless warnings from corporate America and after consumer confidence tumbled to the lowest levels since February 2021. It seems some of the earnings optimism we had early is quickly fading and everyone is focusing on how hard of a recession will the economy have and what will that do to the crude demand outlook. ​

Congo is expected to be auctioning off lots of oil and gas blocks that could threaten endangered gorilla habitats, which might lead to some resistance to participate. The oil market will remain tight as we will not see any immediate new sources of output. ​ Even as oil giants reap in record profits, they will hesitate to invest significantly in new oil wells.

Many energy traders are focusing on the widening difference in prices between WTI and Brent crude. ​ Russia’s handling of energy to Europe will likely lead to shortages that should keep that premium wide. ​

Gold eyes FOMC rate decision 

Gold prices are consolidating ahead of another pivotal FOMC decision. ​ This is the moment for gold that will break the precious metal’s back or offer hope that peak tightening has been priced in. ​ Investors are growing optimistic that the economic slowdown will contribute to a quicker decline with pricing pressures, which suggests the Fed’s tightening job might be done by the end of the year. ​ The Fed won’t lock themselves into any strong stances on the trajectory of future rate hikes, but it seems they won’t be in a position to say even more aggressive rate hikes are on the table. ​ A 75 basis-point rate increase seems like a done deal for tomorrow and gold could continue to stabilize above the USD 1700 level as long Powell does not signal a 75 basis point increase could happen again in September. ​ ​ ​

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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