Oil rallies on China’s opening, gold’s great month

Oil

Oil prices are rallying on China’s opening optimism and after another round of US economic data showed the economy is weakening but still far from a recession. ​ Energy traders are looking at the next week and see two potential bullish catalysts for oil prices; an OPEC+ decision that could easily justify lower output targets given China’s demand outlook and a Russian crude price cap that needs to be put in place; otherwise, a ban on Russian imports takes effect on December 5^th.

US energy security advisor Hochstein reiterated that the US is considering increasing purchases once oil prices are consistently at the $70 range. He emphasized that the next week will be big for oil prices and that the US will closely be watching the OPEC+ meeting and what happens with the Russian crude price cap. ​

Oil is starting to get its groove back and it looks like both supply and demand drivers could turn bullish for crude here. ​ If China’s Covid rules are slowly eased and OPEC stays the course, crude prices could rally another 5-10% here.

Gold

Gold traders only care about one thing today and that is Fed Chair Powell’s speech. ​ This is a pivotal moment for gold as it is poised to have its best month since May 2021. ​ If China lifts more lockdowns, a risk rally should help keep gold prices supported, but first we need to see Fed Chair Powell allow markets to continue to expect a downshift in rate hikes next month and that they could pause their tightening soon after. ​

Gold should find strong resistance at the $1800 level but if Fed Chair Powell eases up on the hawkish rhetoric, it could make a run for the $1825 level. ​ If Powell sticks to the script and risk appetite stalls, gold could soften towards the $1750 level.

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