China key to oil prices
Oil prices are paring recent gains in the middle of the week, slipping more than 2% after recovering strongly over the last few weeks. The outlook remains highly uncertain for the oil market and recent sanctions by the G7 and countermeasures by the Kremlin do little to change that at the moment. Both will only be tested if crude prices rise to the point that Russian crude is trading uncomfortably close to the $60 cap or should be above, which is not the case right now. So as it is, it’s all theoretical.
China’s success in pivoting away from zero-Covid could be key to all of this but with trustworthy data on the spread since restrictions were eased hard to come by, we may have to wait some time to fully understand the implications for the economy and therefore oil demand.
Holding gains for now
Gold is trading around $1,800, the level it’s largely fluctuated around throughout December. Whether it’s a reflection of traders not buying the Fed’s hawkish determination or bulls being unwilling to give up on the recovery rally, it’s continuing to hang on in there, albeit on ever-weakening momentum. We could see a correction early in the new year in the absence of a dovish shift in the Fed commentary or some favourable economic data.
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