Little movement in precious metals while oil plummets as supply side worries recede
Fed’s event tonight set to effect all three significantly, and not just because they’re priced in dollars.
GOLD: All eyes on the Fed for safe haven and non-yielding assets
While the FX market will be in focus as the Fed makes its announcement, all USD priced commodities are also in focus, especially non-yielding precious metals like gold. Should a rate cut not occur and this pair's price could be in for a reversal on a stronger US dollar even if geopolitical tensions have yet to subside. Anther Fed rate cut combined with dovish talk, and it might give it the leg it needs to propel its price higher. Both retail and institutional bias are heavy long going into the event, though even if the Fed sounds more hawkish it's highly unlikely they'll be reducing that heavy long bias anytime soon given other geopolitical risk factors and other central bank easing.
SILVER: Outperforming but surprisingly sedate
Had its bull trend not accelerated at the beginning of this month, the retracement may not have been as harsh and would have not undone its technicals so quickly on the daily chart, even if the weekly outlook still looks relatively stronger. Both retail and institutional traders are heavy long in this pair as well, though it’s the former who are extreme long here as opposed to institutional traders in gold who are extreme long at 84%. The bias here amongst larger speculative traders is to the long side but less, at 71% instead.
OIL – US CRUDE: Big retracement as supply side woes may ease
The focus thus far has been on supply side factors keeping energy prices both volatile and finishing lower following Saudi Arabia’s energy minister comments that oil output would be fully restored by the end of the month, and hurting both retail and institutional traders who are both majority long and the former upping their long bias by 8% on short profit-taking and long initiation anticipating further gains. However, while EIA will be released today expected to show a 2.1M deficit following yesterday's API surplus of 0.6M, demand-side factors will be in focus and will depend on how the Fed will react this evening. Should the Fed not introduce significant easing and it could worsen the US-China trade war if the US imposes more tariffs on China as it did last time the day after the Fed's 0.25% rate cut on July 31. The reason for its importance is that worsening trade risks would take oil prices lower on demand side worries.
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