Oil downturn continues, gold climbs

Oil slips as economic concerns weigh

Those economic concerns are filtering through to the oil market which is seeing the third day of losses, down a little more than 1% today. We were bound to see some form of demand destruction if households continued to be squeezed from every angle and it seems we may be seeing that expectation weigh a little as we move into the end of the week.

Meanwhile, China is reportedly looking to take advantage of discounted Russian crude to top up its reserves in a move that somewhat undermines Western sanctions. Although frankly, it would have been more surprising if they and others not involved in them didn’t explore such a move at a time of soaring oil prices.

Still, I expect Brent and WTI will remain very high for the foreseeable future, boosted by the inability of OPEC+ to deliver on its targets and the Chinese reopening.

Gold buoyed by recession fears?

Gold appears to be finally seeing some safe-haven flows as markets react strongly to the threat of recession rather than just higher interest rate expectations. The latter has driven yields higher and made the dollar more attractive while the economic woes they contribute to seem more suited to gold inflows, it seems.

It will be interesting to see how markets react in the coming weeks if the investor mindset has turned from fear of higher rates to the expectation of a significant slowdown or recession. And what that would mean for interest rate expectations going forward. Perhaps we could see gold demand return.

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

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