Gold
On Tuesday, Fed Chair Jerome Powell’s testimony in the Senate set the stage for a possible rate cut in September, with markets anticipating a slowdown in US inflation. Gold prices surged to $2386 on Wednesday, but Powell’s more cautious testimony in the House caused a pullback, erasing gains. Spot gold rose 0.30%, closing at $2371.26 per ounce.
Powell maintained a cautious tone, adding that “more good data” would strengthen the case for easing monetary policy. However, he emphasized that the Fed would make rate decisions “as needed.”
Markets are now betting on a 75% chance of a rate cut in September and another in December. Lower rates tend to increase the appeal of non-yielding gold.
The focus now shifts to the US Consumer Price Index (CPI) data due on Thursday and the Producer Price Index (PPI) report on Friday, with recent data showing inflation cooling from unexpectedly high levels earlier in the year.
Gold Technical Analysis:
Yesterday, gold saw strong upward momentum supported by the $2363 level. The price surged during the Asian, European, and US sessions, briefly breaking above $2386 before pulling back. By the end of the US session, gold had retreated slightly, closing near $2381.
Today’s Focus:
- Short-term strategy: Favor buying on pullbacks and shorting on rebounds.
- Resistance: $2387-$2392
- Support: $2360-$2355
Oil
On Wednesday, oil prices rebounded from a near two-week low after US refining activity surged, leading to larger-than-expected drops in gasoline and crude inventories. However, gains were limited as Hurricane Beryl caused minimal supply disruptions.
Brent futures fell 11 cents, or 0.1%, to $84.55 per barrel, following a 1.3% drop the previous day. US WTI crude fell 7 cents, or 0.1%, to $81.34 per barrel, after a 1.1% decline in the previous session.
US crude inventories fell by 3.4 million barrels to 445.1 million barrels in the week ending July 5, far exceeding analyst expectations of a 1.3 million barrel drop. Market expectations for a 25 basis point rate cut by the Fed in September rose to 74%, up from about 70% on Tuesday and 45% a month ago.
Investors are betting that a rate cut could boost economic growth and oil demand. OPEC maintained its forecast for strong global oil demand growth this year and next, citing resilient economic growth and increased air travel supporting summer fuel use. However, geopolitical developments remain a potential drag on oil prices.
Oil Technical Analysis:
Yesterday, oil saw a bullish rebound from the $81 level during the Asian and European sessions, with prices stabilizing around $80.8 before recovering. The European session saw a strong rebound, pushing prices back above $81.3. During the US session, oil retested the $81 level before surging past $82 by the close.
Today’s Focus:
- Short-term strategy: Favor buying on pullbacks and shorting on rebounds.
- Resistance: $83.5-$84.0
- Support: $81.5-$81.0
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