Oil rallies on China optimism, gold higher

Crude prices are rallying as China’s borders open, refiners get big quotas, and as the dollar slides. ​ Chinese hopes for an improving reopening from Covid could help propel oil prices much higher. ​ Oil’s downward trend was approaching critical support, so energy traders were eagerly looking for any reason to jump back into the oil trade.

The macro environment seems like it is improving and that should help keep oil’s rally going. If the soft landing actually happens, oil might trade closer to the $90 a barrel level this summer.

Gold

It looks like everyone is liking gold as the peak in yields appears to be in place. Gold could see further momentum if China’s optimism continues. ​ Ahead of the Lunar New holiday, retail gold buying should improve even as prices are elevated. ​ ​

Gold’s rally however should run out of steam as traders will await to see how the Fed reacts to the December inflation report. ​ Expectations are for the disinflation trends to continue, but core cpi might struggle to come down as quickly. ​ Energy prices plunged in December, but that positive contribution to the fight against inflation might go away this month.

Gold has massive resistance at the $1900 level, but that might not last if core prices cool much more quickly.

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