The only sector where investors are less shy in placing bids is the energy sector. Brent and crude oil prices have traded in positive territory earlier today, and the upward trend for the price is very much intact. A lot of this is mainly due to concerns about the oil supply. Yes, Saudi Arabia has played its part, and it is increasing oil supply. However, traders know that the oil supply increase by OPEC isn't enough to fill the vacuum of 1 million barrels created by the absence of Russian oil. The situation becomes even more dire when you look at China and begin to think that economic activity is going to recover as the country is rolling back its Covid-related restrictions.
Going forward, we expect that any retracement in oil prices could remain attractive for traders as they will continue to consider it an opportunity to bag a bargain. We may not see another stellar rally for oil prices, but looking at the fundamentals, it is clear that oil prices are unlikely to roll back to their normal price level of $60 a barrel anytime soon.
Gold
The precious metal continues to consolidate as the biggest denominator for the price remains the US inflation reading which is due on Friday. The US economic calendar is very much lackluster until then, and only the CPI reading is likely to bring mammoth moves for the dollar index, and that could move the gold price.
So far, the gold price has dipped back into negative territory for this week, and it is barely keeping its neck above water if we look at the price-performance month to date. The last two months have also been difficult for the price, and we have seen it retracing from its high, despite the fact that inflation in the US has been increasing. In other words, gold prices have been decreasing while inflation has been soaring. The reason is not that gold has lost its credentials as an inflation hedge, but the dollar index has seen tremendous strength as the Fed is on the most hawkish monetary policy.