Daily Market Report: Gold, Silver, & US Oil
Precious metals end higher ahead of tonight’s Fed announcement, oil up on another massive API drawdown.
GOLD: Appetite for non-yielding assets set to be effected by Fed’s decision this evening
ECB and BoJ inaction didn’t help increase appetite for non-yielding assets where investors were expecting further easing. But now it’s the Fed’s turn, and a reduction in US interest rates – be it by 0.25% or the unlikely 0.5% – should aid assets like gold, which managed to rise as of late with both retail and institutional bias tilting heavily to the long side anticipating even further gains. From a technical standpoint – and its far less relevant on a fundamental day like this – the pair’s price has been stalling at the highs but failing to undo its bull trend technical overview just yet. Fed inaction could undo a large part of those gains, while a rate cut and guidance towards further rate cuts this year could send the pair’s price past its short-term resistance level that has managed to hold time and time again.
SILVER: Back at its short-term resistance level and awaiting the Fed’s expected rate cut
As with gold, it was a green day for silver’s price as well despite the US dollar not necessarily underperforming in the FX markets. The catalyst for gains is similar here if the Fed cuts rates, but if easing improves industrial demand, then silver’s price might have another leg to stand on. All its technicals are bullish and its ADX showing a propensity to trend, but its initializing bull trend has been stalling at these levels with contrarian strategies offering limited opportunities as well. Going into this evening’s event both retail and institutional traders are holding heavy long bias, the former at an extreme long 87% and rising, while the latter at a heavy long 67%.
OIL – US CRUDE: Another massive API drawdown sends energy prices higher
Another week, another significant drawdown for US oil inventories according to API. This time around it wasn’t as sizeable at -6M, but EIA’s the more encompassing figure that oil traders will be on the look out for this evening is expected to show a more modest -2.5M drawdown after last week’s significant 10.8M deficit. On the demand (and USD) side, the Fed’s decision will also matter with easing expected to stimulate demand, though sour trade talks between the US and China resuming today could undo any uplift in demand as well. Multiple factors to consider then on both the demand and supply side, and with the technicals turning slightly more positive as its price is above all its main moving averages save for the 100-day MA.
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