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Commodities try to shrug off Powell’s hawkish message about consecutive hikes

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Commodities were tested after Fed Chair Powell triple downed on the Fed’s dot plots.  The dollar initially caught a bid but that was short-lived.  At the end of the forum, traders really didn’t learn anything new.

Oil

Before the EIA report, crude prices were wavering after a larger than expected drop in inventories, countered fears that several banks will be sending the global economy into recession. Yesterday, the API report showed crude stocks declined by 2.4m bpd.

Energy traders however turned bullish quickly the EIA energy report showed a 9.6 million bpd draw and robust demand signs everywhere.  US crude exports rose above the 5 million bpd level, jet demand rose to highest level since 2019, and the 4-week average gasoline demand surged to the best levels since December 2021.  The oil outlook was too pessimistic and this report reset the market.

Gold

Gold remains in the house of pain, falling to a 3-month low as investors grapple with FOMO and as central banks send global bond yields higher. The peak of tightening cycles keeps getting pushed higher and that has been bad news for gold.

Gold did not get any favors from Fed Chair Powell as the pushback of more tightening saw rate cut bets pushed deeper into next year.  The precious metal also got some hawkish signals from the ECB and BOE, while the BOJ noted that there are signs inflation will pick up next year and that the BOJ is ready to shift policy, potentially even as soon as this year.

All eyes are on gold’s $1900 level, as a breach could trigger some technical selling.  Gold is above where it was trading before the ECB forum, so it might continue to stabilize here.

 

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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