‘Buy the dip’ might be dead for the stock market, but it probably should still work for energy traders. Despite all the fears of aggressive central bank tightening of monetary policy and the slower economic growth that will ensue, the oil market remains very tight.
With gasoline prices surging above $5 per gallon, the Biden administration’s call for oil companies to ramp up refining capacity was easily met with an explanation that they will need the government to provide policies that support the industry domestically. Even if the government were to change its stance on energy, and provide some capital investment that won’t have an impact on prices before the midterm elections in November. The oil market will remain very tight until crude demand destruction becomes more noticeable in the fall.
Gold/FX
Gold’s back. Gold has resumed its role as safe-haven as financial markets worry about aggressive central bank tightening globally and US economic data decelerates. Recession fears are growing and that is triggering an exodus of equities and influx of safe-haven purchases of bullion.
The dollar top is in place as the other major central banks follow the Fed with strong tightening signals. Adding to the dollar’s weakness was reports that President Christine Lagarde told finance ministers that the European Central Bank’s new anti-crisis tool will launch if borrowing costs for weaker nations climbs too fast.