Oil, gold under pressure from central banks

Oil

Crude prices were under pressure as fears of an aggressive central bank tightening are driving concerns for a quickly weakening global economy and as the UAE plans to increase oil output. ​ The global economy is slowing and that has been troubling for the crude demand outlook. ​

Oil pared losses as Wall Street saw a broad reversal at the NY open. While pessimism remains elevated for global growth, extreme positioning before the Fed seems unlikely. ​

Gold

Gold is breaking as surging real rates show no signs of easing and as it fails to act like a safe-haven. ​ This is a brutally tough weak for bullion as so many central banks this week are contemplating jumbo-sized interest rate hikes. It is hard to get a handle on what will be the peak for the Fed and until that happens, gold will remain vulnerable. ​

Gold will eventually resume its role as a safe-haven, but the peak in the dollar needs to be put in place and that won’t happen for a couple of meetings. ​ What is driving the hesitation for scaling into a long-term position with gold is that investors are not convinced that even when the Fed pauses, that might not guarantee they are done hiking. ​ The risk that the Fed will pause and then have to restart raising rates is elevated and that has completely upended the gold trade. ​

Gold is due for a bounce and even if that happens post-Fed this week, a sustained rebound will only occur if more signs emerge that inflation is easing. ​

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.