Paring gains
Oil prices are falling again on Tuesday after initially recouping losses at the start of the week. While traders remain very optimistic about China and to a lesser extent, the resilience of the global economy this year, the fact remains that it won't be a smooth process, and that has already been evident in the economic data in the opening weeks of 2023.
It will be interesting to see how oil prices respond to today's US inflation data as interest rates are now at a point where every 25 basis points matter and could be the difference between a soft landing and a recession. Equity markets don't appear to be fully capturing that at the moment but oil appears to reflect that much more.
Awaiting the inflation release
Gold remains choppy in the lead-up to the inflation report. It was starting to drift lower again late last week but that appears to have slowed, probably with an eye on today's release. A strong inflation reading could weigh heavily on the yellow metal and intensify the second wave of the correction.
While it has seen some support around $1,850 this past couple of sessions, the interesting levels remain $1,820-$1,830 and $1,780-$1,800. Another weak inflation print could draw an abrupt end to the correction and see gold rally once more, at which point $1,890-$1,900 may provide the initial test.
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