Oil pares huge gains
Crude prices skyrocketed to a 13-year high at the start of the week as energy traders were thinking the war in Ukraine could lead to an even tighter oil market, as the US tried to convince the Germans to agree upon a ban of oil imports from Russia. After hitting the USD 137 level, Brent crude oil prices settled back to the USD 120 region as Germany resisted cutting off essential Russian energy supplies.
Oil prices over USD 100 throughout the summer will become a bigger drag on the economy than the market was expecting. The Biden administration was pinning hopes that some agreements could be made with both Iran and Venezuela that could bring some much-needed supply to the markets. With no breakthrough with Iran nuclear deal talks, oil prices will continue to grind higher.
Gold
After surging to above the USD 2,000 level, gold prices tentatively turned negative as investors became more convinced that European growth won’t completely disappear this year and that stagflation risks have heavily been priced in. Too much uncertainty with commodity prices and economic growth prospects should keep gold prices supported until investors become optimistic that a negotiated end of the war was in sight.
There was still a lot of optimism that growth prospects won’t crumble completely and that helped trigger some profit-taking after gold prices rallied above the USD 2000 level. Gold prices resumed climbing after Russia-Ukraine talks did not yield a significant result on a truce or ceasefire. The yellow metal looked poised to form a trading range around the USD 2,000 level.