Oil finds support, gold looks vulnerable

Oil

After a rough few weeks, crude prices are showing signs of stabilization around the mid-USD 90s as the oil market still remains tight despite another wave of weakening economic data in the US and Europe. ​ This week is all about geopolitics and the Fed for oil prices and that means, oil might struggle to make fresh lows.

Global recession calls were supported by economic data from Germany that showed business confidence plunged to the lowest levels since early in the pandemic and after a wrath of Fed regional surveys (Philly, Dallas, and Chicago) which were far from inspiring.

Despite the growing risks of a severe recession, oil should see strong support at the USD 90 level over the short-term.

Gold falls ahead of Fed

Gold prices are declining as investors brace for a Fed that remains committed to fighting inflation and as Chinese demand for gold remains uncertain. ​ As the Fed rushes to get policy to neutral, that has been keeping gold vulnerable ahead of each FOMC decision. ​ The economic data is showing weakness which will eventually complicate the Fed’s tightening plans, but for now it seems rate hikes at each meeting for the rest of the year seems like a safe bet.

Gold is still looking vulnerable here as it struggles to find buyers; ETF purchases have disappeared, China’s Covid situation should keep the precious metal purchases depressed, and the strong dollar trade does not want to go away.

If gold tentatively breaches the USD 1700 level before the FOMC decision, the USD 1675 will prove to be massive support.

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