Market Recap
The Federal Reserve held interest rates steady, maintained its projection for two rate cuts this year, and unexpectedly slowed the pace of balance sheet reduction. The US dollar pared intraday gains, sending gold surging past $3,050 to a fresh all-time high, closing at $3,047.39 per ounce. Meanwhile, oil prices rebounded on Middle East tensions and a decline in US fuel inventories, but gains were capped by rising economic uncertainty highlighted in the Fed’s outlook.
Gold Overview
On Wednesday, gold surged past $3,050 per ounce as the Federal Reserve maintained its outlook for two rate cuts in 2024 and slowed the pace of quantitative tightening (QT). The US dollar retreated following the announcement, fueling strong gains in gold. At the close, spot gold rose 0.44% to $3,047.39 per ounce.
The Fed kept its policy rate unchanged at 4.25%-4.50%, aligning with market expectations, while the latest dot plot still indicated two rate cuts this year. However, what surprised markets was the Fed’s decision to slow the pace of balance sheet reduction starting April 1, lowering the monthly Treasury runoff cap from $25 billion to $5 billion.
Fed Chair Jerome Powell downplayed concerns over inflationary pressures from new tariffs, stating it was “too early” to determine their impact. His remarks suggested that the central bank saw no immediate need for aggressive policy adjustments. However, Fed officials acknowledged rising uncertainty in economic growth forecasts, with risks skewed to the downside, while inflation risks remained tilted to the upside.
Kathleen Brooks, Head of Research at London-based XTB, noted, “Powell’s use of the term ‘transitory’ when describing tariff-related inflation echoes past debates but appears aimed at reassuring markets.” Meanwhile, independent metals trader Tai Wong commented, “Gold has entered a bull market after surpassing the $3,000 threshold and may climb further as market uncertainty and inflation concerns persist.”
Gold – Technical Outlook
Gold maintained its bullish momentum, stabilizing above $3,022 before extending gains. The European session saw a brief pullback, but the US session fueled renewed buying interest, sending gold past $3,050 and closing near session highs. The daily chart recorded a bullish breakout, confirming the continuation of the uptrend.
Gold – Key Levels to Watch
- Resistance: $3,060-$3,070
- Support: $3,035-$3,030
Crude Oil Overview
On Wednesday, oil prices rose on Middle East geopolitical tensions and a sharp decline in US fuel inventories, but gains were capped after the Fed flagged economic uncertainty in its outlook. At the close, WTI crude for April delivery gained 0.39% to $67.16 per barrel, while Brent crude for May rose 0.31% to $70.78 per barrel.
Market Drivers:
- US Inventory Data: The EIA reported a 1.75 million-barrel build in crude stockpiles, exceeding analyst expectations of a 512,000-barrel increase. However, distillate stocks, which include diesel and heating oil, plunged by 2.8 million barrels, far exceeding forecasts.
- Geopolitical Risks: Israeli forces resumed ground operations in central and southern Gaza, stoking fears of further regional instability and supply disruptions.
- Fed Impact: The Federal Reserve’s cautious economic outlook added pressure on demand expectations, limiting oil’s upside potential.
Josh Young, CIO at Bison Interests, stated: “While crude inventories increased, the drawdown in refined products suggests an improving demand outlook, which could support prices in the near term.”
Crude Oil – Technical Outlook
Oil bounced off support at $66 but faced resistance near $67.50. While short-term buying interest is evident, the broader downtrend remains intact as prices remain below the 10-day and 20-day moving averages.
Crude Oil – Key Levels to Watch
- Resistance: $68.3-$68.8
- Support: $66.0-$65.5
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