Oil dips on China lockdowns and stagflation risks, gold hovers

Crude prices softened as stagflation risks have risen for the US and as China’s reopening hits a major roadblock as Shanghai is expected to lock down seven districts this weekend. ​ The oil market remains very tight, but the short-term crude demand outlook took a bit of a hit today. ​

Whatever weakness emerges for crude will likely be short-lived as this will be one of the busiest driving seasons ever. The pent-up demand for vacation and travel will be front-loaded and demand for crude will be robust even if gas prices make a move towards 6 dollars a gallon.

Gold edges lower after ECB meeting

Gold prices edged lower as global bond yields rallied after the ECB signaled the transition to tightening and as investors anticipate what could be a very hot inflation report. ​ Gold traders just want to see how hot inflation got in May and if that changes market expectations to eye half-point rate increases by the Fed beyond September. ​

Expectations have been steadily growing that inflation will remain scorching hot as the oil price rally remains intact and Corporate America continues to signal price increases will continue to come the consumers’ way. ​

Eventually, global growth concerns will lead to some safe-haven flows for gold but the initial shock of a hot inflation report could be painful for bullion investors. If gold collapses, the USD 1785 to USD 1800 zone should provide some support. In the event that inflation surprisingly eases, sellers will emerge ahead of the USD 1890 level. ​

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