Oil and Gold’s Paths Converge In New York Tonight

Oil and Gold both await different data highlights in tonight’s New York session.

CRUDE

Crude yet again attempted to pick itself up off the floor overnight only to run into a wall yet again, with both Brent and WTI finishing roughly unchanged from the previous day. The wall, in this case, was OPEC’s announcement that the market rebalancing was happening at a “slower pace” than expected with the exempt Libya and Nigeria’s production increasing. More importantly, the unheralded American Petroleum Institute’s (API) crude inventories showed an increase of 2.8 million barrels versus and expected 2.7 million drawdowns.

This leads us into the main event for oil traders this week, which is not this evening’s FOMC rate decision, rather it is official DOE Crude Inventories Report where the street is again predicting a roughly 2 million barrel drawdown. Traders will be nervously hoping that this is one of the weeks that the official numbers are uncorrelated with the API ones. Should this not be so and they reveal another increase in inventories following last
week, we can expect to see both Brent and WTI coming under sustained selling pressure again.

Brent spot trades at 48.15 in early Asia with resistance still sold at 49.00 and support at 47.25.

WTI spot trades at 45.90 with resistance around 46.50 and support at 45.50 and 45.00. A break of the latter implying a retest of the May low at 43.50.

GOLD

Gold continues to be locked in a 1260 to 1270 range as bullion traders await this evening U.S. CPI and the FOMC Rate Decision. With geopolitical risk having receded over the last week, Gold is now trading on fundamentals and will be thus, subject to the nuances of U.S. Dollar weakness or strength. Clarity on this front should emerge following the releases above, at least in the short term.

With a lot of stale short-term long positioning in gold, quite a bit of it no doubt at less than salubrious levels above 1280.00, the risk could be a further washout to the downside if the Federal Reserve retains its hawkish stance this evening.

Gold has significant initial support at 1259.00, with a break implying the yellow metal could drop to the 1240.00/1245.00 region, home to the 100 and 200-day moving averages. Above, Gold has resistance at 1270.50 and then 1282.00.

Gold trades at 1269.50 in early Asia, and we would expect that financial markets in the region will remain muted ahead of the main event tonight. Gold should, therefore, meander between 1265.00 and 1272.00 through the session.

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