China to Drive Stronger Demand for Oil
China may well be the outlier in all of this as there has been no need for excessive monetary tightening, and rather, the slowdown in growth is almost certainly behind it. In fact, the transition from zero-Covid to living with it is reportedly going very smoothly. It could boost the economy earlier and more than expected, leading to higher growth forecasts for 2023.
While that could support the global economy through a difficult period, it may also worsen the inflation problem due to the much higher demand for commodities, including crude oil. Oil prices have been trending higher in recent days on these improved forecasts, although they still remain around the middle of the range they’ve traded within since early December.
Gold Only Mildly Buoyed
Fed Chair Powell’s soothing words also generated some relief for gold overnight, although compared to the declines late last week, it was quite mild. The yellow metal has been on a phenomenal run since early December, and a correction was growing ever more likely. While traders have welcomed Powell’s consistent stance, it may not be enough to save gold, and a deeper correction could well be on the cards. It’s seeing some support now around $1,860, but more substantial support may be found around $1,820-$1,830.