Oil and gold steady ahead of key FOMC meeting

Oil continues to mark time

Oil eased ever so slightly overnight, Brent crude falling just 0.40% to USD68.50 a barrel, and WTI falling 0.60% to USD64.80 a barrel. Those losses have been reversed in Asia, Brent crude climbing to USD68.70 a barrel and WTI to USD65.50 a barrel. The European woes have temporarily taken the wind from oil’s sails as markets price in a slightly lower global consumption because of it.

The net result is one of directionless range trading over the past few sessions as oil markets also await the FOMC. Brent crude is content bounce around in a USD67.50 to USD70.00 a barrel range. Meanwhile, WTI is anchored in a USD64.00 to v66.00 a barrel range.

Instead of trying to second-guess the FOMC, I retain the view that a daily close above or below the present ranges will signal a directional move of at least USD2.0 a barrel. I remain confident that a wall of physical buyers will meet any material dips in oil prices.

Gold continues to tease bullish investors

Gold finished unchanged at USD1732.00 an ounce overnight, climbing to USD1735.50 in a lifeless Asian session. Gold is clearly in a pre-FOMC holding pattern, but for once, it is circling from a position of strength. Gold’s price action continues to be supportive as it has shrugged off higher US yields and a stronger US dollar this week.

Gold needs to clear USD1740.00 an ounce, and most significantly, the breakout at USD1760.00 an ounce to give bullish investors the hope that the worst is over for gold. Support remains at USD1720.00 and USD1700.00 an ounce, and gold looks likely to stay in a USD1725.00 to USD1740.00 an ounce range ahead of the FOMC.

Tomorrow we will have a much better picture of whether gold’s longer-term downward correction is over, or if it was yet another false dawn.

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