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COMEX Gold started the year 2023 shining as it ended the first official session of the year with gains. Gold ended Tuesday’s session around 1% higher as a cut down in the pace of Interest rate hikes from the Fed and fears of recession has triggered haven plays in the yellow metal.
The haven play can be seen as both the yellow metal and US Dollar gained yesterday which normally is not the case as gold is negatively correlated to the dollar.
Gold and dollar will be driven by important data pointers this week from the US. It will start will ISM manufacturing and Dec FOMC meeting minutes today followed by the all-important NFP print later in the week.
Crude
NYMEX WTI crude started the new year with high volatility as price initially inched up testing the immediate resistance near $81.50/bbl and then fell to as low as $76.60/bbl before ending the day in red by around 4%. If we take the retreat from the highs, it fell around 5.5%.
The major factor that triggered selling was the looming recession and slowing factory activity in China. The recent data showing slowing factory activity in the world’s biggest oil-importing nation has added fuel to fire.
Moreover, the IMF’s warning of a potential global recession in 2023 has cast doubts on world oil demand.
Additionally, a sharp recovery in US Dollar has supported the bear case. As global growth worries are haunting oil markets’ important economic data releases in the week from the world’s largest economy, the US might drive oil prices in the near term.
Outlook By: Ravindra V.Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities Ltd