Gold eyeing Fed nudge, Oil gets short-term lift

Gold and USD looking exhausted ahead of Fed

It will be interesting to see how the dollar and gold respond to the Fed later today.

Gold has really struggled to break back above $2,000 after collapsing back through here in spectacular fashion just over a month ago. Moreover, the dollar has been under pressure since March and has recent shown signs of pushing for a correction. With both of these trades showing signs of fatigue, a failure by the Fed to meet or surpass expectations could get quite a reaction.

Equally, should Powell’s soothing tones successfully reassure investors that they won’t be faced with rate hikes any time soon and could even be treated to further easing, it could spell doom for the dollar recovery trade before it’s had chance to get going.

The picture will look a whole lot clearer tomorrow but if gold can’t break $2,000 again today, we may be waiting a while and the path of least resistance may lie below.

Oil bounceback temporary

Oil is enjoying another bumper session on Wednesday, rising as Hurricane Sally heads for the Gulf Coast, forcing more outages.

The API also reported a huge 9.5 million barrel inventory drawdown on Tuesday, far surpassing expectations ahead of today’s EIA report, which is forecasted to drop by just 1.27 million barrels. I’m sure expectations will have since been modified though.

Both of these factors seem temporary though and have maybe just triggered a corrective rally in oil prices, after they fell heavily this month. WTI still faces significant resistance around $39, with Brent seeing a similar challenge around $42. The outlook remains challenging though, as evidenced by the recent projections from IEA and OPEC.