Oil at 7-year high, gold steady

Oil jumps as OPEC see a well-supported market

Oil is trading at a seven-year high and the latest OPEC report offers little hope of that trend reversing course, with the group confident that demand growth will remain strong this year. OPEC sees demand hitting 100m barrels per day in Q3, surpassing pre-pandemic levels this year. This comes despite headwinds created by omicron and rising interest rates which they don’t believe will have an overly detrimental impact.

They did revise up US shale output, which given OPEC’s failure to hit production targets will be welcome. Producers surely won’t be able to resist these prices but to what extent they can make a difference remains to be seen. For now, prices are continuing to rise with only very minor corrections along the way.

Gold could slip if markets continue to price in more rate hikes

Gold is marginally lower on Tuesday, although it’s been quite volatile since the US joined. The yellow metal has been well supported in recent weeks despite bond yields rising to reflect an expectation of increasingly aggressive tightening from central banks. That’s not something that’s typically associated with higher gold prices which may suggest higher inflation expectations and more risk aversion. But with talk now starting around more than four Fed hikes or a kick start in March, we could see some of those inflation hedges – if that’s what they are – unwound.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam