Oil and gold dragged down on weakening outlook and inflation risks

Oil

Crude prices are declining as the risks to the global outlook become overwhelming; ​ ​ China’s economy isn’t roaring back, global recession fears are returning after inflation unexpectedly rose in Spain, and as investors remain cautious ahead of a busy week of central bank decisions and peak earnings season. ​

Oil is pulling back here as the vibe on Wall Street is to be ready to de-risk later this week. ​ Growth prospects are weakening here and that should not do any favors for an already weakening short-term crude demand outlook.

In addition to the Fed, earnings and a jobs report, energy traders will pay close attention to an OPEC+ meeting that could see output remain steady. ​ President Putin had a phone call with the Saudi Crown Prince, which some are viewing as positive that the group is in agreement with the path on output.

WTI crude may edge lower but should have support well ahead of this month’s low.

Gold

Gold prices are weakening as global bond yields rally after a hot inflation report from Madrid reminded investors that maybe they were too quick in declaring the inflation fight is nearly over. ​ Gold’s main kryptonite is if the Fed can’t control inflation and they need to tighten much more than markets are expecting. ​ Gold could enter the ‘danger zone’ if we get a couple more hotter-than-expected inflation reports and a robust NFP report that suggests wage pressures will be here for a while. Disinflation trends still remain in the US but any shock CPI report could disrupt the very bullish outlook that has been building up for bullion.

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