Oil trades sideways
Oil prices traded sideways overnight, despite a suitably dovish FOMC, and significant falls in US official crude and gasoline inventories, along with a weaker US dollar. All of those factors should have supported oil prices, and although oil did not retreat, it did not rally materially either. Brent crude was unchanged at USD 74.75 a barrel, and WTI finished just 0.70% higher at USD 72.40 a barrel.
Oil prices have crept higher by 25 cents a barrel in Asia. Still, the lack of upward momentum after crude inventories fell by 2.25 million barrels and gasoline inventories fell by a whopping 4.1 million barrels indicates that both contracts have seen the best of the recovery rally from early last week.
The balance of risks now shifts to the downside slightly, although I emphasize that at these price levels, both Brent and WTI look close to equilibrium right now. Nagging doubts over the impact of the Delta-variant on consumption, and the recovery speed, appear to be staying the hands of more bullish price action.
With that in mind, I expect Brent crude to continue trading in a roughly USD 73.00 to USD 75.00 a barrel range into the end of the week, while WTI should be confined to approximately USD 71.00 to USD 73.00 a barrel.
Gold rises on unchanged FOMC
Gold prices rose overnight after the FOMC indicated no change to its monetary policy outlook was imminent. That flattened the US yield curve and sent the US dollar lower, which lifted gold prices from just under USD 1800.00 an ounce. Gold rose 0.44% to USD 1807.00 an ounce, rising another 0.43% in Asian trading to USD 1814.75 an ounce.
With the FOMC removing the upward pressure on the US dollar now, gold has likely weathered the storm that has left it glued in a USD 1790.00 to USD 1810.00 range for the past week. Support at USD 1790.00 looks safe for now, and a rise through USD 1810.00 should trigger a test of the 200-DMA at USD 1822.00 an ounce, possibly by the end of the week.
A daily and weekly close above the 200-DMA would be a strong bullish signal indicating further gains to the USD 1840.00 an ounce region. However, we will likely need to see additional US dollar weakness to keep the bullish momentum going. Gold should find plenty of willing buyers now on dips to USD 1800.00 with the FOMC clearly not interested in rocking the tapering boat for now, and US data tonight likely to show inflationary pressure is alive and well.