Crude prices are tumbling as China continues to struggle with its fight against COVID and as global recession fears grow as rates surge. China is the key question mark for the crude demand outlook and it seems that reopening momentum will remain elusive. The lockdown of Chengdu, a vital transportation hub, will trigger another massive shock for the Chinese economy.
The mood is risk-off on Wall Street and that is driving the dollar to fresh records, which is also putting added pressure on all commodities. Oil is looking very vulnerable here as the risk of further Chinese lockdowns grow and as king dollar might be ready for another major run.
If September becomes a bloodbath on Wall Street, WTI crude could slide towards the $80 region, but the supply outlook should prevent a significant selloff beyond there. OPEC+ is going to have an easy time justifying a modest production cut given all the percolating global market worries.
Gold pummelled as dollar flies
Gold prices are in freefall and have tested the $1700 level after another round of strong economic data suggests the Fed could deliver more rate increases. Gold is becoming a punching bag as surging Treasury yields have rejuvenated the king dollar trade. It has just been bad news everywhere for gold. No reprieve in sight for gold until the move higher with global bond yields is over. If the nonfarm payroll report impresses, gold could see momentum selling target the $1650 region.
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