Gold fails to hold above $1,800 as investors favor riskier assets, while WTI rises by $1.0 on soft US CPI figures

WTI increased by almost $1.0 on Wednesday as risk assets rallied more broadly as a result of lower-than-anticipated US inflation data. The announcement that oil shipments through the Druzhba pipeline have resumed and mixed US inventories limited the upside. Both copper and gold reached new one-month highs, albeit gold ultimately declined due to risk-on movements.

As part of a broader risk asset rally, the front-month futures contracts for West Texas Intermediate, or WTI, the US benchmark for sweet light crude oil, increased by about $1.0 on Wednesday. Weaker-than-expected US inflation data stoked hopes that US inflation has peaked and allayed worries about overly aggressive Fed tightening in the upcoming quarters. The closing price of WTI on Wednesday was close to $91.50, a respectable recovery from earlier intraday lows of around $88 per barrel.

On Wednesday, the US dollar, which negatively correlates with oil prices, was headed for its worst day in a month, with the DXY last down at 1.0%. According to analysts, a decrease of this size would typically result in a daily gain of $2–3 barrels for WTI. On Wednesday, prices were impacted by news that oil supplies through the Druzhba pipeline, which travels from Russia through Ukraine to Europe, have resumed.

You should only trade derivatives with capital you can afford to lose because doing so carries a significant level of risk to your investment. Trading derivatives may not be appropriate for all investors, so make sure you are fully aware of the risks and, if necessary, seek independent advice. Before engaging in a transaction with us, you should carefully review the Product Disclosure Statement (PDS), which is available from this website or upon request from our offices. Spreads starting at 0.0 pips are available with commission fees of USD $3.50 for every 100k transacted in raw spread accounts. Standard accounts provide spreads starting at 1 pip with no added commission fees. CFD index spreads begin at 0.4 points. Residents of any nation or jurisdiction where such distribution or usage would be in violation of local law or regulation are not the intended audience for the information on this website.

After failing to receive payment from Russian pipeline operator Transneft, which Transneft said had been delayed by Western economic sanctions, Ukraine had stopped flows. The payment was hastily delivered on Wednesday by EU members, permitting a resumption of supplies and allaying concerns that Russia had revealed a new front in its energy blackmail campaign against the EU.

Data on the US crude oil inventories was also a main topic. The most recent weekly data was conflicting, with headline crude oil stockpiles increasing by 5.457 million barrels as opposed to the anticipated fall of 1.0 million barrels. However, a 4.978 million barrel decline in gasoline stocks was far bigger than the predicted 1.1 million barrel decline. That allayed concerns about the US’s demand being destroyed by inflation and most likely signifies a recovery in demand as a result of recent price declines.

A Reuters survey published on Wednesday allayed fears about the near-term US demand picture. The key finding was that US oil infrastructure owners anticipate strong energy demand for the remainder of 2022. This contributed to a nearly 5.0% intraday increase in US natural gas prices back above the $8.0 mark. Meanwhile, the price of oil is still falling and has been since mid-June.

The price of copper increased by more than 1.0% on Wednesday to reach its highest level since the beginning of July in the mid-$3.60 range. This increase was fueled by a strong decrease in the value of the US dollar that followed weaker-than-expected US inflation figures. A downside surprise in Chinese consumer and producer price inflation was also mentioned by traders as being favorable to prices since it gives China’s central bank more room to maintain accommodative financial conditions this year to boost growth. The world’s top user of copper is China.

Gold prices rose to new one-month highs on Wednesday near $1,808 as a result of the weak dollar and a steep decrease in US government yields. Gold prices, which are considered as both a safe haven and an inflation hedge, were unable to maintain their earlier session highs and have now fallen to trade slightly in the red due to the broad gain across risk assets.

Leave a Comment