Stock Markets Rally as Gold and Oil Stutter

March 10, 2022 10:12

After consecutive sessions of oil and gold rising and stocks sliding, yesterday bucked the trend.

After soaring past $2,000 an ounce on Tuesday, spot gold looked set to break its all-time high of $2,072.50, which was set in August 2020. However, yesterday, the precious metal retreated back below $2,000, ending the session 2.8% lower and wiping out all of Tuesday’s gains in the process.

We saw a similar situation with crude oil. After several days of gains, where it looked like both Brent and WTI crude were destined to record new all-time highs, both dropped sharply.

WTI crude ended the session almost 12% lower, whilst Brent closed 13% lower, in oil’s biggest single-day plunge since the early days of the pandemic in 2020. Both benchmarks have managed to recover some of their losses this morning.

This slump in oil prices came as concerns regarding restricted supply were eased by various factors.

Prices dropped sharply yesterday after the United Arab Emirates’ (UAE) ambassador to Washington yesterday said that his country would be encouraging OPEC (of which they are a member) to consider raising oil output. However, following these comments, the UAE energy minister took to Twitter to reconfirm the country’s commitment to the existing agreement amongst OPEC+ members.

These comments followed news that the US were moving to ease sanctions on Venezuelan oil and were closer to reaching an agreement with Iran over reviving the nuclear deal, both of which could result in more oil supply for the global market.

As oil and gold prices cooled, stock markets rallied across Europe and North America. In the US, financial and tech shares soared to lead the main Wall Street indices higher. The Dow Jones, S&P 500 and Nasdaq Composite gained 2%, 2.57% and 3.59% respectively.

Spiralling energy prices combined with the anticipation that the Federal Reserve will hike interest rates next week in an attempt to rein in high inflation have sparked fears of a prolonged economic downturn.

Therefore, the news of a potential increase in oil supply helped ease investor concern, as lower energy costs will lower input costs for companies and, hopefully, boost consumer sentiment.

Two industries which reacted particularly well to yesterday’s oil price slump were banking and airlines.

Banks’ profits are positively correlated with the overall health of the economy and so share prices had come under pressure in recent sessions on fears of an economic downturn.

For example, prior to yesterday’s session, since the start of February, Bank of America share price had fallen by 16.4%. Yesterday, however, Bank of America closed the session with a gain of 6.35% with other big name banks recording similar gains.

Likewise, rising oil prices had caused airlines to suffer in the stock markets recently, as fuel costs account for around 30% of an airline’s operating costs.

The drop in oil prices was, therefore, well received by investors and airline stocks received a boost in the market. Amongst the best performers in the airline industry yesterday was United Airlines, whose share price surged 8.27% and continued to rise in after-hours trading.

Investors will want to keep an eye on oil prices in the coming days, weeks and months, as they will continue to have an impact on the financial markets and the situation is constantly changing.

Today, the European Central Bank (ECB) will announce the outcome of its most recent policy meeting and, whilst interest rates are expected to remain unchanged, investors will be looking for any signs of how current geopolitical issues will affect monetary policy.

Furthermore, ahead of the Fed’s own policy meeting next week, the latest US Consumer Price Index (CPI) figures are scheduled to be released this afternoon. Whilst these figures won’t show the full impact of the recent rise in oil prices, investors will be watching closely.

If inflation is reported higher than expected, then the Fed may be forced to consider a higher rate rise than the 25 basis points currently expected.

Depicted: Admirals MetaTrader 5 – United Airlines Daily Chart. Date Range: 7 July 2021 – 9 March 2022. Date Captured: 10 March 2022. Past performance is not a reliable indicator of future results.

Depicted: Admirals MetaTrader 5 – United Airlines Weekly Chart. Date Range: 23 August 2015 – 9 March 2022. Date Captured: 10 March 2022. Past performance is not a reliable indicator of future results.


Invest with Admirals

With an Invest.MT5 account from Admirals, investors can buy shares in Bank of America, United Airlines and over 4,300 other listed companies from around the world! Click the banner below in order to register for an account today:

Invest in the world’s top instruments

Thousands of stocks and ETFs at your fingertips


The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:  

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s