Oil rises but ranges
Oil prices crept higher overnight, with Brent crude rising 0.80% to USD 74.80 a barrel and WTI finishing just 0.20% higher at USD 72.20 a barrel. The non-descript session is in keeping with my thesis that oil prices are set to range this week after recovering all of the “delta-dip” losses from the last Monday week.
The USD 74.00 region for Brent crude, and USD 72.00 for WTI, look like equilibrium levels. Both contracts should continue to consolidate their gains, with volatility much reduced from last week. As such, I am not expecting any fireworks until after the FOMC conclusion. Brent should trade in a USD 73.00 to USD 75.00 a barrel range, and WTI should remain in a broader USD 71.00 to USD 73.00 a barrel range.
Another surprise increase in US API Crude Inventories could spark a few nerves and see oil prices marked down. I expect any sell-offs to run out of steam ahead of the lower mentioned ranges.
Gold eases on FOMC nerves
Gold eased back below the USD 1800.00 an ounce mark yesterday, edging 0.25% lower to USD 1797.50 an ounce in another day of dull range trading and consolidation. Residual fears that the FOMC may mention the taper world is mainly responsible for the selling pressure, and gold is unlikely to rally significantly until the FOMC decision and statement.
Gold remains mostly off investors’ radars, with most of the action occurring in other asset classes. It remains confined in a broader range bounded by its 100 and 200-DMAs at USD 1798.00 and USD 1823.00 an ounce, respectively. Gold has also traced out clearly denoted support at USD 1790.00 an ounce, while it has interim resistance at USD 1810.00 an ounce.
A daily close below USD 1790.00 an ounce would suggest a deeper correction to the critical support at USD 1750.00 an ounce. However, the charts indicate that gold is, in fact, quietly consolidating at these levels in preparation for a resumption of the longer-term uptrend. A close above the 200-DMA would signal this has started. In the meantime, playing the range and patience are the orders of the day until the FOMC outcome.