- Commodities get a boost as China weighs broad stimulus
- Gold’s Triple Top still holds
- Dollar tumbles as Fed rate hike odds drop to 9.6% for Wednesday’s meeting
Oil
Crude Oil WTI prices got a boost after China prepared a broad package of stimulus. A surprise cut to the 7-day reverse repo rate sent a message to traders that the world’s second-largest economy is finally going to get significant stimulus that should help with their struggling post-COVID recovery. In addition to China’s stimulus, energy traders are anticipating the impact from the Saudi oil price cuts to take tighten the market quickly next month.
Oil extended its rally after the latest inflation report sealed the deal for the Fed to skip a rate hike at this week’s meeting. The disinflation process remains intact and that could mean the dollar’s days are numbered, which would provide some support for oil prices.
Gold
Gold initially got a boost after inflation hit the lowest levels since early 2021. For gold to rally, it needs Wall Street to become confident that the Fed is done raising rates. This inflation report was in-line, but some Fed members might be concerned that core pricing pressures are looking sticky. The Fed will remain data-driven, but optimism should be high that the end of tightening is near.
Even if the end of tightening is widely expected, gold may struggle if stocks continue rise. Risk appetite for equities continues to overextend, so eventually a mean reversion should be good news for bullion.
