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Dovish Fed Spurs Gold Interests, Oil Undeterred by Stock Build

Dovish Fed Spurs Gold Interests, Oil Undeterred by Stock Build

Nathalie Huynh,

Talking Points:

  • Gold propped up by potential Fed rate hike delay, albeit volatility from profit-taking
  • Oil retreats moderately as DoE crude build data presented bearish supply outlook
  • Copper steadies near 2-week high thanks to China metal imports and oil’s resilience

US dollar advanced against most commodities and emerging market currencies after the Federal Reserve’s FOMC committee held interest rate band unchanged. This meeting was considered a prelude to March meeting where a rate hike may materialize. The committee’s statement opened up chances of a delay in March and made significant emphasis to global risks.

Gold price earned fresh buying interests as a result of potential delay by the Fed and widespread economic uncertainty. Profit-taking and long-covering has since sent gold from 1128.16 top down to the low 1120s, however broad interests persist. Gold may hold on to its rally top, albeit trading volatility through today.

In a typical buy the rumour sell the fact development, oil price rallied prior to Department of Energy’s weekly inventory report, only to retreat back around $32 amid bearish supply outlook. Crude stocks rose almost twice the amount expected at 8.38 barrels. Large build was also seen in gasoline, despite a drop in Refinery utilization rate.

Nevertheless similar data from API yesterday likely prepared the market for disappointment therefore lessened the corresponding sell-off. Oil held out in Asian trade which helped to calm other commodities.

Copper price moved in tandem with oil to stabilize near its 2-week high and above 2.0500 today. Metals scored 2 days of gains after China’s strong imports data, as buyers increased orders in anticipation of further weakness in the yuan versus USD. Occasional positive news emerged as Antofagasta Plc planned to boost copper production although Moody downgraded Freeport.

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GOLD TECHNICAL ANALYSIS – Gold price holds above 1113, top of the early 2016 rally which is now acting as a support level. Momentum in overbought zone indicates that there are sufficient interests to sustain current levels, although risk of a reversal looms. Gold may settle into a consolidation range, if support is not broken.

Dovish Fed Spurs Gold Interests, Oil Undeterred by Stock Build

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price edged up on a third session above support level of 2.0020. Like the rest of the metals complex, copper clearly displays an upward bias. An immediate resistance to watch out is 2.1485, topped by the 2.2025 critical level.

Dovish Fed Spurs Gold Interests, Oil Undeterred by Stock Build

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil price mounted over 20-day moving average at 31.77 for the first time since its descent started early this month. As seen in the past, a clean break above 20-day MA could signal a consolidation period or even upside extensions. The bears should be cautious around this pivot level, given strong upward momentum.

Dovish Fed Spurs Gold Interests, Oil Undeterred by Stock Build

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Want to read market’s momentum: Speculative Sentiment Index

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Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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