On Tuesday, ahead of the Federal Reserve’s final rate decision of the year, the US dollar and Treasury yields remained strong. Traders expect the Fed to slow the pace of rate cuts in 2025, leading to a 0.23% decline in gold prices. Meanwhile, oil prices fell for the second consecutive day due to cautious market sentiment and weak demand prospects. However, a sharp decline in US API crude oil inventories limited the losses, with crude oil futures closing nearly 1% lower.
Gold Market Overview
Ahead of the Federal Reserve’s final interest rate decision for the year, the US dollar and Treasury yields remained strong on Tuesday. Traders anticipate a slower pace of rate cuts in 2025, which weighed on gold prices. By the close, gold had fallen 0.23% to $2646.66 per ounce.
The US Dollar Index (DXY) rose 0.08% to 106.946, remaining at elevated levels, which made gold more expensive for holders of other currencies. The 10-year US Treasury yield hit a daily high during the session but closed 0.20 basis points lower. Economic data revealed that US retail sales for November exceeded expectations, reflecting the economy’s robust momentum heading into the end of the year.
On Tuesday, Federal Reserve officials began their two-day policy meeting. The market widely expects a 25 basis point rate cut this week. However, recent signs of inflationary pressures suggest the Fed may pause rate cuts in January. Economists predict that when the Fed releases its updated Summary of Economic Projections (SEP) on Wednesday, it will signal a reduction in the number of rate cuts expected for 2025.
Forex market analyst Fawad Razaqzada stated, “The key question is whether the Fed will adopt a more hawkish or dovish stance than current market expectations. Given Trump’s agenda, there’s speculation that the Fed may be more cautious about signaling further rate cuts at this stage.”
Kelvin Wong, Senior Market Analyst at OANDA, noted in his latest gold report that gold continues to face resistance above the $2700 per ounce level. He added that rising bond yields and persistent inflation fears are increasing medium-term risks for gold, but the metal remains in a long-term uptrend.
Key Event to Watch Today:
Investors should pay close attention to the Federal Reserve’s interest rate decision and the monetary policy press conference led by Fed Chair Jerome Powell. Developments in geopolitical affairs should also be closely monitored.
Technical Analysis of Gold:
On Tuesday, gold faced resistance and declined in choppy trading. In the afternoon, the European session saw gold weaken after failing to break above the 2658 resistance level. During the US session, it briefly dipped below the 2633 support before rebounding to close in a narrow range.
The daily candlestick chart shows a small bearish candle, indicating continued consolidation around the 2633 level. While gold remains under pressure, it does not exhibit a clear, extreme bearish trend in the short term.
Today’s Focus:
- Trading Strategy: Favor buying on dips, with short positions on rebounds as a secondary approach.
- Resistance Levels: 2660-2665
- Support Levels: 2630-2625
Oil Market Overview
Ahead of the Federal Reserve’s rate decision, oil prices fell for a second straight day as cautious market sentiment and weak demand forecasts weighed on the market. However, a sharper-than-expected drop in US API crude oil inventories offered some support.
By the close, WTI January crude futures fell by $0.63 (down 0.89%) to $70.08 per barrel, while Brent February crude futures declined by $0.72 (down 0.97%) to $73.19 per barrel.
According to a survey by the Ifo Institute, German business sentiment deteriorated more than expected in December. Amid geopolitical uncertainty and a sluggish industrial sector, German businesses have become increasingly pessimistic about the coming months, further dampening the outlook for global oil demand.
The US API crude oil inventory data provided some relief. The latest report from the American Petroleum Institute (API) showed a substantial drop in US crude oil inventories, with a drawdown of 4.694 million barrels for the week ending December 13, far exceeding the forecasted decline of 1.85 million barrels.
This follows an increase of 499,000 barrels in the previous week. However, inventories at Cushing, Oklahoma, the key delivery hub for US crude futures, rose by 778,000 barrels, reversing the previous week’s 1.517-million-barrel decline.
Key Event to Watch Today:
Investors should monitor the release of the US EIA crude oil inventory report for the week ending December 13, along with any geopolitical developments.
Technical Analysis of Oil:
On Tuesday, oil prices experienced pressure in volatile trading. During the Asian and European sessions, prices fell after encountering resistance at the 70.5 level. Later in the day, oil prices dropped below the key $70 support and continued to weaken.
In the US session, WTI briefly broke below $69 before rebounding slightly to close at higher levels. The daily candlestick chart shows a “hammer” pattern, indicating a bottoming attempt around the $69 level as oil completed a deeper retracement.
Today’s Focus:
- Trading Strategy: Favor short positions on rebounds, with long positions on pullbacks as a secondary approach.
- Resistance Levels: 71.3-71.8
- Support Levels: 69.0-68.5
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Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it.
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