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Oil rangebound, gold shines

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Oil looking for direction

Oil prices remain directionless as energy traders try to assess how significant the deceleration in economic activity will be for the short-term crude demand outlook. The oil market remains tight but the COVID situation in China points to a gradual pickup in demand and that might keep this market rangebound a while longer.

Saudi Prince Faisal bin Farhan noted that the kingdom has done what it can for global oil markets and that should mean production increases will remain slow. Oil prices will likely remain supported above the USD 100 level for the rest of the year. ​ ​

It looks like the only thing that will send oil back to the pre-COVID levels is demand destruction across the world’s largest economies and that probably won’t happen. WTI crude pared gains after a steady stream of weakening US economic data, but the overall outlook is still ok and a recession is unlikely until 2024.

Gold

Gold prices are surging as Treasury yields plunge following a wave of risk aversion that stemmed from disappointing earnings and deteriorating economic data from the US. ​ Non-interest bearing gold is a safe-haven again and it could be on the verge of a major breakout if prices can recapture the USD 1885 level. A peak in Treasury yields is in place and now the dollar looks like it is ready for a pullback as the ECB is ready to raise rates which is good news for the euro. ​

There might be no stopping gold right now as the wall of worry on Wall Street continues to grow. ​ Gold should remain supported as inflationary pressures weigh further, China’s COVID situation remains a big unknown, and corporate America continues to slash outlooks.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. 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. Prior to OANDA 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, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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