Geopolitical Tensions Boost Gold and Oil Prices Simultaneously

The Middle East conflict boosted safe-haven demand, while the minutes of the recent Federal Reserve meeting suppressed hopes of an early rate cut, leading to a slight increase in gold prices, holding above 2020.

Tensions in the Middle East geopolitical situation, with traders assessing signs of recent supply tightness, causing a 1% rise in oil prices.

Gold >>

On Wednesday, the Middle East conflict boosted safe-haven demand, while the recent Federal Reserve meeting minutes suppressed hopes of an early rate cut, causing spot gold to plummet intraday, briefly falling below the 2020 level before ending with a slight increase of 0.08%, closing at USD 2025.99 per ounce.

COMEX gold futures fell by 0.15%, closing at USD 2036.8 per ounce. The Houthi militia allied with Iran continued attacks on shipping lanes in the Red Sea and the Strait of Hormuz, with gold seen as a hedge against economic and geopolitical uncertainty, while rising interest rates reduced the appeal of holding non-interest-bearing gold.

The US dollar index edged slightly lower by 0.07% on Wednesday, near a two-week low, making dollar-denominated gold more attractive to overseas buyers.

Despite inflation rates being close to expectations for most of 2023, the market believes that making further progress in reducing inflation may take longer than expected.

Gold’s technical outlook saw volatile trading, experiencing a rebound after hitting highs during the Asian-European session, swiftly rising above the 2023 level before accelerating further to breach the 2031 level and reaching around 2032 before encountering resistance, then consolidating in a sideways pattern.

In the late American session, there was a second rebound attempt but met resistance near the 2031 level, leading to a retreat and closing below the previous low amidst oscillations.

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 2032-2037.
  • Key support levels to watch in the short term are around 2013-2008.

WTI Crude Oil >>

On Wednesday, tensions in the Middle East geopolitical situation and traders assessing signs of recent supply tightness led to WTI crude oil closing up 1.1% at USD 77.98 per barrel; Brent crude oil also closed up 0.76% at USD 83.09 per barrel.

The near-month crude oil contracts were trading at multi-month highs compared to the distant-month contracts, a market structure known as backwardation, which is considered a sign of tight supply in the market.

Additionally, providing support to the market was the indication of US refineries ending maintenance and resuming production, after refinery operating rates fell to their lowest since December 2022, leading to an increase in crude oil inventories.

The indication of US refineries recovering from maintenance after operating rates fell to their lowest levels since December 2022 stimulated an increase in crude oil inventories, supporting the market.

On the technical front, oil prices experienced a strong rebound after initially declining, with prices quickly falling during the Asian-European session.

Followed by further retracement and stabilization above the USD 76.3 level, then a rebound in the late American session, pushing prices back above USD 77 and continuing the bullish rebound, with prices accelerating further overnight, breaking through the USD 78 level and closing strongly.

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 79.3-79.8.
  • Key support levels to monitor in the short term are around 77.0-76.5.

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