Crude prices have been in a ping-pong session over the past couple of days as energy traders monitor headlines regarding the Russia-Ukraine geopolitical conflict and Iran nuclear talks. The Biden administration reached out to the Saudis but was unable to make any progress in getting oil prices down. The Saudis are sticking to their gradual output increase strategy for now, which means that energy traders will be buying on every oil price dip.
The hot inflation report sent the dollar higher which tentatively dragged down commodities, which include oil prices. The oil market fundamentals, however, remain very tight and with no immediate changes to that outlook, crude prices seem poised to go higher.
Gold
Gold prices went on a wild ride after a hot inflation report raised Wall Street expectations for a much aggressive Fed tightening cycle. Gold initially plunged as swap markets priced in 6 total rate hikes this year, with the March liftoff becoming a half-point increase.
With inflation hitting more categories, gold could start behaving more like an inflation hedge as the flattener trade will likely limit the dollar’s gains going forward. While the US consumer seems to be heading for some tougher times as real average hourly earnings are not keeping up with these surging widespread price increases, gold should see limited safe-haven flows as the overall economic outlook is still upbeat.
Gold will likely continue to trade between $1800 and $1855 until money markets become more convinced of the Fed’s tightening path. If the 10-year Treasury breaks above the 2.00% level, gold could see some short-term weakness, but nothing that should signal the beginning of a bearish trend.