Oil prices stabilize, gold consolidates ahead of FOMC

Were fears of oil deficit premature?

Oil prices appear to have stabilized in recent days, not far from the middle of the range they traded within from early December to March. The post-OPEC+ gains have now been wiped out which suggests traders are now of the belief that the economic outlook has deteriorated to the extent that the output cut won’t create the deficit that was feared when some were calling for $100 oil. Of course, a lot can change over the coming weeks and months and almost certainly will but for now, it seems the outlook for oil prices is as it was.

Gold consolidates ahead of FOMC decision

Gold has gone into consolidation in the run-up to tomorrow’s FOMC decision as traders await the latest views from the central bank in light of recent data and the fallout from the mini-banking crisis. Markets suggest a 25 basis point hike is locked in and while that could arguably prove to be a mistake, it looks the easiest option at this stage.

What messaging accompanies the rate hike will determine whether we could see a move back above $2,000 and a run at record highs around $2,070. The Fed must be concerned about the tightening of credit conditions in the aftermath of the collapse of three banks but it clearly doesn’t want to soften its rhetoric until it has to. The result could be a sharp, sudden pivot from a policy perspective over the coming months but as far as tomorrow is concerned, a “wait-and-see” or “meeting-by-meeting” approach may be preferred. Whether that will be perceived to be dovish enough, we’ll have to wait and see.

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