The Fed’s decision is about to be cautious, and the price of gold retreats below the threshold, and oil prices remain stable for the time being

Kelly Yeung

ATFX.com Representative
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In the past weekend, new cases in a single day in some countries hit a new high, and the global increase in new crown cases hit the largest in two months, which should bring different guidelines for gold trading and crude oil. Gold prices can get part of the hedging support, but fuel demand may be a threat to oil prices due to the slowdown caused by the epidemic. However, the performance of the trading market on Monday indicated that risk appetite was still continuing, and US stocks set record highs for two consecutive days.

This week’s Fed’s decision will be the primary focus of the commodity market. The rest of the time data, including the initial value of US GDP in the second quarter, the number of initial jobless claims and the PCE price index, can also affect the market. Today the Fed has begun to discuss interest rates, and market sentiment has gradually moved closer to caution.

The price of gold fell by 6.6% in the first half of this year, but it has rebounded since July. The price of gold will continue to play a demand advantage in hedging inflation and epidemic risks. Therefore, it has been converted to support for gold prices. However, its performance is also affected by the direction of global central bank interest rates. The strong impact of economic recovery.

As inflation and nominal interest rates gradually normalize, gold is more susceptible to further increases in real interest rates. After the gold price recorded its first weekly decline in five weeks last week, it closed below the $1,800 mark on Monday, and the performance of gold prices may be biased towards consolidation before the Fed’s decision.

Although Powell's press conference this week is still expected to make a dovish stance, the resolution stated that any details are a risk of volatility in terms of gold prices. If there is any statement that speeds up the discussion of tightening policies, or suggests that the possibility of reducing debt purchases or even raising interest rates in the next few months will increase, the price of gold will fall because of the pressure on the interest rate outlook.

The spot gold price has been subject to resistance from the 50 moving average since last week. It has been tested many times but failed to break through. The current 10 and 20 moving averages have also acted as an obstacle near the 1800 mark. It is expected that the price will continue to maintain consolidation before the Federal Reserve resolution is announced. The day's closing can return to the 1,800 US dollar mark, and look to the 1808/1810 US dollar as the initial target. If there is a chance to break through, it will look to the 1815/1820 US dollar level. For support, pay attention to last week's low and the current Fibonacci adjustment level of 1789/1786.

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Recently, the news that the crude oil trading market itself can bring special guidance tends to be flat, and oil prices fluctuate in accordance with market sentiment between economic data and the epidemic. However, oil prices have relatively stabilized after shocks in the past two days. The spread of the Delta variant virus has triggered concerns about fuel demand. However, the market expects that crude oil supply will be tight for the rest of this year, so it is also a see-saw to oil prices.

According to the latest statement by White House officials, due to worries about the Delta mutant virus and the increase in the number of new domestic cases, the United States will not cancel any existing travel restrictions "at this time." This means that the travel restrictions that have banned people from many parts of the world from entering the United States since 2020 will not be lifted in the short term, so fuel consumption can be more colorful.

According to the latest data from the U.S. Energy Agency, the inventory of kerosene-based aviation fuels continues to rise, while Bloomberg cited data from the U.S. Transportation Security Administration. North American aviation tourism activities are rebounding, but they are still only 78% of the 2019 summer level. Said progress is relatively slow. In addition, in the first half of 2021, China's crude oil imports fell for the first time in eight years, and the market expects that this year's overall import growth may drop to the lowest point in 20 years, so it also limits the upward trend of oil prices.

It can also be seen from the changes in holdings that investors have turned cautious. Last week, fund managers slashed their long positions in U.S. oil, the largest reduction since 2017. The CFTC position data shows that in the previous week, some speculators bought short positions rather than establishing new long positions, indicating that they were driven by profit-taking after the decline in oil prices.

If the Fed releases a dovish signal this week, the US stock market is expected to continue to rise, which will help stabilize oil prices in a favorable atmosphere. Before the resolution, pay attention to the API report in the early morning of the next day and the EIA inventory changes tomorrow night. After the eight-week consecutive decline of crude oil inventories, see if the latest data continues the increase of the previous week, and if the increase exceeds expectations and the previous value, it will guide oil prices. Short-term lower.

After gaining support from the 50 moving average, US oil futures also temporarily maintained trading within the range. It is currently close to the resistance level of 72.41 US dollars, which is also the high level of last week. If it is tested again but fails to break through, it may return to below 72 US dollars. This position is also where the 10 moving average is located. After breaking below, pay attention to the possibility of pressure close to the $71 mark. On the upside, if it can break through the current range, the first target to see is $73.

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