Oil dips, gold consolidates

Oil slightly pares gains after Monday's surge

A 7% surge in oil prices on Monday was always going to be difficult to sustain and today's modest declines are a reflection of that. Whether fueled by the prospect of an EU ban on Russian imports, Chinese lockdowns being less economically restrictive, or the dimming prospects for substantial Saudi output increases; it seems oil traders aren't willing to give up the gains that easy.

It's going to be tough for the EU to agree on a ban that isn't phased in overtime as they're simply too reliant on Russian oil. In years gone by, maybe. But supplies are too tight and it will take time to source alternative producers. Still, it's the fact that they're tight and Russian exports are slipping as a result of sanctions, combined with a lack of willingness to alleviate those pressures by those that can that makes these prices sustainable for now.

Gold should remain well support

We're continuing to see consolidation in gold in what has been choppy trading conditions over the last week. The yellow metal remains in demand in the current environment but the recovery in risk appetite has softened its appeal.

That said, inflation remains sky-high and the Russian invasion of Ukraine continues. Commodity prices have pulled back but remain extremely elevated and the risks still appear tilted to the upside. Gold is unlikely to fall out of favour but it could continue to consolidate around USD 1,900 as traders protect against the risks that lie ahead.