Oil prices are softening a little on Thursday after nudging higher again a day earlier. Brent appears to be settling around the mid-point of the $90-$100 range as traders weigh up the impact of the OPEC+ cut against a bleak global economic outlook.
The zero-Covid rumours in recent days may have given oil another bump higher, as will the crude inventory data that showed a large drawdown. But with those rumours not confirmed and recession talk growing louder, it may be a little premature to be suddenly optimistic.
Not as bad as it seems
Gold bulls thought Christmas had come early on Wednesday when the Fed indicated a slower pace of tightening will be considered next month. But just as quickly as the good news was delivered, the caveat was yet another crushing blow. The prospect of further tightening overall was enough to wipe out the benefits of lower hikes and gold now finds itself trading around the week’s lows.
The question is, once the dust settles, will traders continue to view this so negatively? Slower tightening now buys time for the data to improve in a manner that could negate the need for more later, something 75 or 100 basis points (bp) hikes do not. This may not be such bad news after all for gold. But traders may wait for some encouragement from the data before getting too excited again.