Oil falls stocks lower, gold lower on strong USD

Oil

Crude prices and US stocks appear to be in lock-step ahead of Friday’s inflation data.  Omicron uncertainty and concerns of weakening crude demand snapped a three-day rally in oil prices. Information on Omicron has been fluid, with earlier in the week one study showed a third Pfizer dose neutralized the Omicron variant. The latest news showed that the Omicron variant is 4.2 times more transmissible than the delta variant. For the unvaccinated population, Omicron may be a fast wave and could support the idea that the short-term hit to crude demand will be quick and fast.

Besides incremental Omicron updates, the rest of the week is all about two things: a potentially hotter-than-expected US inflation report that might send the dollar higher and the weekly Baker Hughes rig count which should show more rigs are coming online.

WTI crude should find initial support at the USD 70 handle and if that holds by the end of the week, the recent rebound may continue.

Gold eyes inflation report

A strong dollar has gold prices declining towards the lower boundaries of this week’s trading range.  Gold could have a make-or-break moment following the US inflation report, which could seal the fate for an accelerated tapering of asset purchases by the Fed. If tomorrow’s inflation report delivers a 7-handle, the Fed will likely double its tapering pace which could suggest a first-rate hike will fully be priced in for the May 4^th policy meeting.

Gold traders are awaiting a big move and probably will wait until gold is clearly free from the USD 1760 to USD 1800 trading range. Gold’s longer-term bullish outlook remains intact, especially now that some people are talking about a recession in 2023 due to an accelerated tightening cycle by the Fed.

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