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.
This article 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 Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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