Commodities were tested after Fed Chair Powell triple downed on the Fed’s dot plots. The dollar initially caught a bid but that was short-lived. At the end of the forum, traders really didn’t learn anything new.
Oil
Before the EIA report, crude prices were wavering after a larger-than-expected drop in inventories, which countered fears that several banks will be sending the global economy into recession. Yesterday, the API report showed crude stocks declined by 2.4M bpd.
Energy traders however turned bullish quickly as the EIA energy report showed a 9.6M bpd draw and robust demand signs everywhere. US crude exports rose above the 5 million bpd level, jet demand rose to highest level since 2019, and the 4-week average gasoline demand surged to the best levels since December 2021. The oil outlook was too pessimistic and this report reset the market.
Gold
Gold remains in the house of pain, falling to a 3-month low as investors grapple with FOMO and as central banks send global bond yields higher. The peak of tightening cycles keeps getting pushed higher and that has been bad news for gold.
Gold did not get any favours from Fed Chair Powell as the pushback of more tightening saw rate cut bets pushed deeper into next year. The precious metal also got some hawkish signals from the ECB and BOE, while the BOJ noted that there are signs inflation will pick up next year and that the BOJ is ready to shift policy, potentially even as soon as this year.
All eyes are on gold’s $1900 level, as a breach could trigger some technical selling. Gold is above where it was trading before the ECB forum, so it might continue to stabilize here.