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Gold edges lower, but oil and wheat prices rally

Gold is still unable to bounce despite the strong inflation outlook, but oil and wheat prices are rising as supply questions loom large.

​Gold continues to fall

There has been no let-up for gold here, as the dollar continues to strengthen.

The expectation of higher prices thanks to surging inflation would normally be considered beneficial for gold, which is viewed as a useful hedge against inflation, but this has been undermined by the rampant strength in the US dollar.

The past week has seen sharp losses for the commodity, building on the existing big falls seen since the middle of April. The price is now testing long-term support from early 2021, and a move below this would amplify the bearish view.

$1785 and then $1763 are the next major targets to the downside, and any sustainable bounce must take out $1830 and then move on back above the 200-day simple moving average (SMA) to suggest even a short-term low has been created.

WTI stumbles but remains on track for more gains

It looks like concerns about supply tightness remain the big worry for oil prices, which have enjoyed gains in recent sessions.

This comes despite growing worries about the prospect of demand destruction due to high prices, lockdowns in China and slowing growth in Western economies such as the UK and US.

But the ongoing war in Ukraine and expectations of a further ban on Russian energy imports into Europe mean that supply tightness wins out as a major driver, and with one source of supply constricted others will have to take up the slack.

WTI rallied sharply in the second half of last week, making gains for three successive days. While the price has dropped back in early trading today, buyers have begun to emerge on the dip, providing an expectation that further gains will result. This puts $110 and then $114.80 into view.

Sellers will need a durable reversal below $100 to suggest a bearish view has come into play.

Wheat prices surge again

An already pressured wheat market has been given fresh worries by news that India will impose an export ban in order to conserve stockpiles.

Droughts and heat waves have hit yields in the country, which is a notable exporter, and this comes on top of the existing situation in Ukraine, where key exports are likely to be disrupted due to the ongoing war.

As a result, prices have gapped higher this morning, and seem poised to begin another attempt to reclaim the highs seen at the beginning of March. Then $13.40 a bushel was the peak, after a huge rally during February thanks to the outbreak of war.

The bullish view for prices remains in place, thanks to recent gains, which have seen the price rally off trendline support. A reversal below $11 would be needed to provide evidence that a downward move is now in play.

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