Gold prices got a nice boost in early trading, as a disappointing durable goods report pulled the dollar into deeper territory. Experts were expecting more the twice the 0.8 gain recorded. The report snuffs out any tiny bit of hope for a hike in benchmark interest rates by the Fed tomorrow. This led to longs being liquidated in the USD.
Spot gold this morning hit a low of $1,231 before the durable goods numbers, then jumped $15 to a high of $1,246 before settling in at the $1,243 range.
Higher oil prices caused by the weaker dollar and encouraging earnings reports led to stocks opening higher in New York after slight losses Monday. However, indices fell into the red as attention returned to the Fed.
Both WTI and Brent crude are up nearly 2% this morning, after losses on Monday. WTI settled down 2.5% yesterday, and Brent futures were down 1.4%
Gold has eased back under first resistance at $1,243 after the initial price spike this morning, as traders resume defensive positions ahead of the Fed. $1,252 is the second resistance level today. Support starts at Friday's low of $1,227, then $1,220.
April gold futures settled 0.8% higher on Monday, at $1,240.20. This erased some of Friday's 1.3% loss. Spot gold closed at $1,237.90, for a gain of $5.70.
Oil futures skidded Monday, as Kuwait's production continues to climb back to normal levels after a workers' strike. Iraq is pumping more oil, as anticipated.
Saudi Arabia is expected to finish expansion of the Shaybah oilfield next month. This will increase production at this field by a quarter-million barrels a day, for a capacity of 1 million barrels per day. This project is meant to replace capacity lost from aging oil fields.
Of course, all eyes are on the Fed today and tomorrow. While no one expects a rate hike this week, there is plenty of nervousness over the tone of Wednesday's FOMC statement. There will be no press conference by Fed Chair Janet Yellen after the meeting, putting extra attention on tomorrow's policy statement. Yellen has been sounding a cautious note regarding imminent rate hikes, but several Fed regional presidents are sounding more hawkish all the time. Few traders are willing to go all-in one way or the other.
Federal regulators are pushing to finish polishing new banking regulations. This rule would require banks to have more "quality" reserves, instead of leaning on short-term repurchase agreements. The collapse of the repo market was a major factor in causing the 2008 financial crisis and bailout of Too Big To Fail banks by taxpayers.
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