The Upcoming Fed’s Rate Decision and Its Impact on Gold, Oil, and Natural Gas

On the other hand, oil prices and natural gas are also enjoying a rally after dropping significantly due to supply disruptions.

Fed Cuts to Boost Gold

Following Fed Chair Powell’s confirmation of a rate cut at the Jackson Hole conference, gold prices increased. Gold benefits from lower borrowing costs as it doesn’t pay interest.

The rate at which the Fed will cut is now the question facing the gold market. The latest US jobs data report was mixed, adding to the debate over whether the Fed will deliver a 25bp or a 50bp cut. However, whatever the case is, gold prices can rally to new highs.

Looking at the technical side, gold prices are currently trading at $2569, and the next target is $2600, supported by the 50 and 100 SMA crossover on the 4-hour chart.

Oil Prices in a Recovery Mode

Oil prices continued to recover despite the supply disruptions in the Gulf of Mexico. ICE Brent’s settlement increased by more than 1.9% in a single day, bringing it close to $72. Hurricane Francine’s effects on the supply chain are still helping. According to the most recent statistics from the Bureau of Safety and Environmental Enforcement, the hurricane has shut down 41.74% of US oil production in the Gulf of Mexico.

However, the IEA’s monthly oil market report presented a gloomy outlook. According to IEA projections, global oil consumption increased by just 800k barrels per day in the first half of the year and is now predicted to expand by 900k barrels per day in 2024. China has been the main cause of this slower development in demand.

Amidst all the other news surrounding oil prices, the Feds meeting can provide limited support to boost the oil once the supply issues fade.

Looking at the technical side, the price is touching the 50 SMA. If it manages to break, the next resistance level for Brent is $73.32.

Natural Gas is Getting Some Support

This week saw a rebound in natural gas prices in the US and Europe after previous dips. Regarding the US, after US natural gas storage expanded less than anticipated, the front-month Henry Hub contract rose by more than 3.8%. Concerns over the US Gulf Coast’s ability to export LNG have been heightened by Hurricane Francine.

In addition to concerns over Russian gas supplies through Ukraine, European gas prices have benefited from a 5-day delay of maintenance work at the Kollsnes processing facility in Norway.

On the Feds front, a weaker dollar makes US natural gas cheaper for foreign buyers, and increases demand for exports, causing natural gas prices to rally further.

The technical side supports the bullish argument, as the 50 SMA crossed above the 100 SMA.

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