WTI, gold and silver pause rallies ahead of FOMC rate announcement
Outlook on WTI, gold and silver ahead of Wednesday’s widely expected 25-basis point Fed rate hike.
WTI bounce likely has further to go
The recovery in the price of WTI is taking a breather ahead of Wednesday’s FOMC meeting at which a 25-basis point rate hike is expected and as investors weigh up the global demand outlook for crude oil against the backdrop of easing concerns over the global banking crisis.
According to a recent IEA statement, top oil importer China is expected to drive an increase of two million barrels a day in global oil demand this year, putting a floor under the price of WTI which dropped by around 17% from its early March highs as renewed recession fears surfaced due to the global banking crisis.
A rise above Friday’s $69.81 per barrel high would engage the December trough at $70.25, above which sit the January and February lows at $72.50 to $72.64. Slips should find support at Monday’s $67.89 daily candlestick hammer high.
While this week’s low at $64.37 holds, further upside in the price of oil is likely to be seen.
Gold gives back more of its recent gains
Gold’s over 10% two-week rally amid safe-haven flows out of equities and into the precious metal ran out of steam ahead of Wednesday’s Federal Reserve (Fed) FOMC meeting in which the US central bank is expected to raise fed funds rates by 25-basis points to 4.75% to 5.00%.
Monday’s spike to $2,009 per troy ounce, to levels last traded in March 2022, has so far been followed by a slide to Wednesday’s $1,935 low, a slip through which would likely lead to the 13 March high at $1,914 being back in focus as risk-on sentiment drives equity markets higher again, triggering flows back out of gold.
Were the Fed to surprise market players with a higher-than-expected rate hike or with a more hawkish outlook, the price of the precious metal may head back up, however, with a rise above the February peak at $1,959 likely leading to a retest of the psychological $2,000 mark.
Further up sits Monday’s peak at $2,009.
Silver advance stalls ahead of FOMC rate decision
The around 13% rally in the silver price over the past couple of weeks amid the global banking crisis has taken it to a six-week high at $22.71 per troy ounce, below which it has been trading the past couple of days.
Were the price of silver to drop through Tuesday’s low at $22.16, the 22 February high at $21.98 would likely be reached, below which sits the mid-March low at $21.47. Failure there would likely spell the resumption of the 2023 descent back towards the 200-day simple moving average (SMA) at $20.96.
If, however, Monday’s high at $22.71 were to be exceeded, the early January low at $23.11 would likely be back on the cards.
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