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Gold prices show signs of topping when all eyes turn to FOMC



GOLD & SHORT OIL PRICING POINTS:

  • Technical positioning of gold price suggests a peak may be in the works
  • Crude oil prices decline as Saudi Arabia calms leap markets
  • FOMC's political guidelines 1965990 ] prices on idle territory in known territory for the fifth day in a row, with traders who were apparently unwilling to show conviction one way or the other before Fed's Monetary Policy Announcement . The US central bank is generally expected to issue further interest rate cuts.

    Futures markets suggest that the probability of just such an outcome is priced at 1

    00 percent. The chance of a 25 bps reduction is preferred by 77.7 per cent, and the possibility of a 50 bps down adjustment is non-trivial 22.3 per cent.

    Such beliefs clash with the Fed's more elaborate guidance, but it seems that investors have already baked their version of perfection at asset prices. That makes the risk of disappointment asymmetrically high: the likelihood of a relatively hawkish withdrawal seems much greater than a dovish one.

    This suggests poorly for gold prices. If the interest-rate FOMC committee leaves the markets as desired, interest-bearing and anti-fiat assets may not look relatively attractive, pushing the yellow metal lower. With traders simply pining for political support, such a scenario is likely to have a greater impact on risk.

    DRESS OIL RETREAT COMPOSED BY FOMC, EIA DATA

    It can push sentiment-sentiment crude oil [19659006] prices. The benchmark index of the WTI contract fell yesterday – clearing almost half of the dramatic upward record recorded at the weekly opening – as Saudi Arabia assured investors that it would not be a lasting supply disruption following the weekend's attack on its Abqaiq facility. [19659009] Amin Nasser – CEO of Saudi Arabia's state oil giant Aramco – said that production from the damaged plant has been restored to about 2 million barrels per day, and recovers close to half its capacity before attack. He added that a full rebound is expected by the end of September.

    EIA inventory flow data is also in print. A reduction of 2.5 million barrels is expected. Leading data from API indicated an increase of 592,000 barrels. If it turns out to be a disappointment over official statistics, any FOMC-related downside press can be amplified.

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    GOLD TECHNICAL ANALYSIS

    Gold prices can form a bearish peak and shoulder (H&S) topping pattern, confirming a daily close below 1480.00, which implies a measured downturn through temporary support in the 1437.70-52.95 zone. against the figure of $ 1400 / oz. Alternatively, a push back over 1523.05 corrects the weekly chart bend level of 1563.00 again.

      Gold Price Chart - Daily

    Gold Price Chart Created with TradingView

    CRUDE OIL TECHNICAL ANALYSIS

    Crude oil prices plunged below $ 60 / bbl figure to challenge previous resistance 58.76, September 10 swing-top. Breaking down below it on a daily closing basis gives trendline support from early August (now at 54.28) back in play. Alternatively, a flashback over the 60.04-84 range opens the door for a challenge in zone 63.59-64.43.

      Crude Oil Price Chart - Daily

    Crude Oil Price Chart Created Using TradingView

    COMMODITY TRADING RESOURCES

    — Posted by Ilya Spivak, Currency Strategist for DailyFX.com

    To contact Ilya, use the comment box below or @IlyaSpivak on Twitter


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