Crude prices rose as a tight oil market would remain in place as the start of the summer driving season would maintain a downward trajectory for U.S. inventories. The EU is struggling to convince Hungary to gain the unanimous support required for a ban on Russian oil. It still seems possible that the ban will be imposed, but Hungary will have to have favorable conditions.
Gains for crude were limited as Chinese Premier Li Keqiang presented an optimistic outlook given the current difficulties with COVID. The crude demand outlook is very uncertain in China, but the United States is still doing well. The latest round of US data suggests the economy is slowing, but consumers are still spending and will likely travel a lot this summer. Personal consumption rose more than expected and unemployment insurance claims improved, contradicting the weaker labor market.
Until a major update occurs with the proposed EU ban on Russian oil or the COVID lockdown situation in China, WTI Crude looks like it will take a nap between $109 and $112 .
Gold pulls back on higher risk appetite
Gold prices fell slightly as risk appetite tried to return to equities after a strong retail earnings outlook, hurting demand for safe havens. Gold was supported by expectations that the Fed will not be as aggressive with monetary policy tightening as some had feared. Gold traders are looking to see if the dollar’s nearly two-week decline is over. A peak in Treasury yields has been set, but the 10-year Treasury yield seems unlikely to weaken significantly from here.
Wall Street will be waiting to see what happens with inflation over the next couple of months and that could mean gold could be poised for a near-term consolidation phase, with $1839 providing initial support and $1870 being the ceiling.
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