Oil dips, gold vulnerable

Oil pares gains

We're seeing small losses in crude after a strong start to the week. That may reflect the reversal in risk appetite during the European session as the latest equity bear-market rally quickly runs on fumes. A bear-market rally is certainly not how you can explain the moves we've seen in oil markets this week; quite the opposite in fact.

Oil's only hope for a substantial price correction lies in a global slowdown or recession. Chinese lockdowns could dent demand in the short-run but as we've seen before, prices eventually bounce back. Recession fears aren't going away which may slow any ascent in crude but no one can ignore the obvious imbalance in the market which should broadly keep Brent and WTI in triple figures.

Gold out of favour

It's been a very interesting few days for gold. For a long time, we have been able to point to a stronger dollar and rising yields to explain why it's fallen out of favour even in periods of risk aversion when traders often gravitate towards safe-havens. But in recent days, the dollar made decent losses and yields were fairly steady but gold failed to capitalise.

That's not a great signal for the yellow metal which is now looking very vulnerable around USD 1,700. As I've said before, USD 1,680 may be more important, given how it's historically traded around there but either way, a break of USD 1,700 would be a blow.

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