Stronger China buoys oil
Oil is heading for a strong week of gains, wiping out last week’s losses, as analysts continue to be encouraged by China’s transition to living with Covid. While the buzzword for large parts of the global economy this year is “resilience”, when it comes to China it’s more a question of just how strongly it will bounce back.
The assumption, once they began removing restrictions, was that the first quarter or two would be tough but the second half of the year would see growth unleashed backed by fiscal and monetary measures. Now it would appear those expectations are being brought forward which should stimulate demand for oil and other commodities. While oil has been somewhat rangebound over recent months, a stronger Chinese recovery could well strongly test those upper limits.
Deeper correction on the cards?
Gold may be in the green on Friday but I’m not convinced its near-term prospects are particularly bullish. The yellow metal has moved into a correction phase over the last week or so and while the back end of last week saw it fall quite sharply, there may be further to go.
It’s been a week of consolidation and clawing back some losses but it’s struggled to gather any real momentum in that and for a fourth day yesterday it ended the session well off its highs. While $1,820-$1,830 is the next technical support area below, it’s $1,780-$1,800 that really intrigues me, should it get that far.
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