Oil edges lower, gold claws back with gains

Oil declines but remains near multi-year high

Oil prices are edging lower on Friday for a second straight session. Formidable US dollar strength following the Fed’s hawkish shift is dominating the oil market heading towards the weekend. Despite the selloff in the latter part of this week, both oil contracts are set to end the week little changed and only marginally off two and a half year gains.

The bullish trend in oil remains intact, thanks to optimism surrounding the demand outlook. The dollar may well be strengthening but the fundamental picture for oil hasn’t changed. The supply/demand equation continues to favour the demand side meaning that any sell-off will likely be short-lived. Taking a longer view on the oil market, rate hikes are a headwind, but a lot can change between now and 2023!

Meanwhile, the near-term demand outlook continues to improve with international travel restarting. The EU has added the US to its list of countries allowing non-essential travel.

Gold rises but outlook remains weak 

What a difference a week makes!! This time last week gold was knocking on the door of USD1900 and now it trades sub USD1800. Continued fallout from the hawkish surprise at the Fed meeting saw gold lose another 2.3% in the previous session, putting losses for the week at 4.5%.  Gold is experiencing its worst weekly performance since March 2020. To say that the yellow metal has lost its shine would be an understatement. Alongside the prospect of tighter monetary policy and higher interest rates, the non-yielding, US dollar-denominated precious metal doesn’t stand much of a chance.

Gold has found support at USD1770 and is attempting to claw back at least a part of yesterday’s steep losses. If resistance at USD1790 holds then bears could gain traction again.

For a look at all of today’s economic events, please check out our economic calendar at www.marketpulse.com/economic-events/

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