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Oil heads higher, gold gets relief from Powell

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China to drive stronger demand

China may well be the outlier in all of this as there has been no need for excessive monetary tightening and rather, the slowdown in growth is almost certainly behind it. In fact, the transition from zero-Covid to living with it is reportedly going very smoothly which could boost the economy earlier and by more than expected, leading to higher growth forecasts for 2023.

While that could support the global economy through a difficult period, it may also worsen the inflation problem due to much higher demand for commodities including crude oil. Oil prices have been trending higher in recent days on these improved forecasts, although they still remain around the middle of the range they’ve traded within since early December.

Gold only mildly buoyed

Fed Chair Powell’s soothing words generated some relief in gold as well overnight, although compared to the declines late last week, it was quite mild. The yellow metal has been on a phenomenal run since early December and a correction was growing ever more likely. While traders have welcomed Powell’s consistent stance, it may not be enough to save gold and a deeper correction could well be on the cards. It’s seeing some support now around $1,860 but more substantial support may be found around $1,820-$1,830.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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