Fed Turns Dovish, Gold Gains 1.1%, Crude Oil Rebounds

Last week, the market unexpectedly welcomed dovish sentiments as gold reclaimed the USD 2000 level. However, on Friday, the third in command at the Federal Reserve took a hawkish stance, leading to a slight decline in gold prices.

This week’s focus is on the PCE inflation index and the final estimate of third-quarter GDP. The depreciation of the US dollar, coupled with growing market sentiment for a possible Fed rate cut, along with support from the International Energy Agency (IEA) raising its forecast for next year’s oil demand, is helping to buoy crude oil prices.

International oil prices recorded their first weekly gain after seven consecutive weeks of decline.

Gold >>

Last week, aided by the unexpected dovish turn from the Federal Reserve, spot gold continued its upward trend, reclaiming the USD 2000 level. The highest point reached last week was USD 2047.94 per ounce, while the lowest touched USD 1973.09 per ounce.

Gold experienced a decrease of USD 9.2, or 0.45%, closing at USD 2035.70 per ounce. It accumulated a weekly gain of approximately 1.1%. Inflation data released last week continued to slow down, and with the persistent rise in expectations of a rate cut, the US dollar faced significant pressure.

Investor bullish sentiment towards gold continued as a result. This week, the market is focusing on the PCE inflation and the final estimate of third-quarter GDP to seek further signs of inflation slowdown.

On the technical side, gold reached a high and then retraced, trading around USD 2017 when Williams made hawkish comments, and later retracing to around USD 2015.

Following the dramatic hawkish shift in remarks by Williams, the third-in-command at the Federal Reserve, gold faced downward pressure, ultimately closing lower after a series of consecutive positive daily performances.

Technical Analysis:

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to watch in the short term are around 2030-2040.
  • Key support levels to watch in the short term are around 2010-2000.

WTI Crude Oil >>

Last Friday in the U.S. market session, crude oil traded around USD 71.90 per barrel. The depreciation of the U.S. dollar, coupled with the increasing market sentiment regarding the possibility of a Fed rate cut, and the push from the International Energy Agency (IEA) raising its forecast for next year’s oil demand, are currently helping to support crude oil prices.

Last week, crude oil recorded a cumulative increase of about 0.3%, marking the first weekly gain in seven weeks. After Federal Reserve officials countered dovish remarks made by Fed Chairman Powell on Wednesday, the U.S. dollar rebounded, putting pressure on crude oil prices on Friday.

The IEA raised its forecast for global oil demand in 2024. In its monthly report, the IEA stated that global oil consumption in 2024 is expected to increase by 1.1 million barrels per day, an increase of 130,000 barrels per day from previous estimates.

The rationale behind this adjustment is the improved outlook for the United States and falling oil prices. Lower interest rates reduce consumer borrowing costs, promoting economic growth and oil demand.

Market expectations suggest concerns about slowing economic growth and oversupply may persist into 2024, and escalating tensions in the Middle East could trigger price volatility.

On the technical side, crude oil experienced a volatile upward trend this week. After touching USD 67.7, oil prices exhibited a V-shaped reversal, reaching a high of around USD 72.44 per barrel and closing around USD 72.0 per barrel. The weekly chart showed a small bullish candle, indicating tentative signs of stabilization.

Technical Analysis:

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to monitor in the short term are around 74.0-75.0.
  • Key support levels to monitor in the short term are around 71.0-70.0.

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