Oil takes a hit, gold extends rally

Slide continues amid uncertain China outlook

Oil prices have tumbled again today, hit it seems by the uncertain near-term economic prospects for China amid surging Covid cases. While reliable data is seemingly hard to come by, the view appears to be that there’ll be significant disruption in the coming months and then a recovery from around the middle of the year which should then boost demand.

Brent has now slipped back below $80 a barrel while WTI has fallen below $75, with both now only around 5% from the December lows. Despite this, the medium-term prospects still appear quite bullish, especially if China can bounce back strongly later this year and fully transition to living with Covid, like much of the rest of the world. Of course, Russia remains the wildcard in all of this, both in terms of its output and influence within OPEC+.

Gathering momentum ahead of FOMC minutes

Gold is charging higher again buoyed by lower yields and a softer dollar. The yellow metal was running on fumes into the end of the year but appears rested and revitalized at the start of 2023. Not only is it rallying, but it’s also building momentum, something that was lacking towards the end of December. Of course, whether that will be sustained will depend on the Fed minutes and, maybe more so, Friday’s jobs report. We’ve had many setbacks over the past 12 months but who knows, maybe 2023 will be the year of positive surprises. Or perhaps that’s all the festivities talking again.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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