Crude prices are lower on disappointment with the size of cuts with China’s key lending rates. ​ Oil seems locked in on anything and everything that has to do with China. ​ Last week, oil was supported by improving Chinese refiner quotas. ​ This week, energy traders are seeing oil weakness emerge on disappointing stimulus efforts. ​   WTI crude looks like it is starting to find some decent support at the $68 region and that should hold as long the Fed does spook markets that they might be ready to deliver more than two additional rate hikes. ​     Gold The gold bears are in control and momentum selling doesn’t seem to care that stocks are softer and as Treasury yields come down. ​ Wall Street is still thinking that the Fed will only deliver one more quarter-point rate rise but no one wants to be long gold before what will likely be a shortened week of hawkish Fed speak. ​ Fed Chair Powell will defend his FOMC performance. Fed’s Waller will stick to his stance of supporting further hikes. ​ Fed’s Goolsbee might be closer to supporting a pause. ​ A temporary rebound in housing data might push Fed’s Bowman might wait to see if that impacts the trend of lower rents. ​ ​ Fed’s Mester has been a true hawk and probably won’t say she sees a reason to pause rate hikes. ​ Fed’s Bullard will likely confirm he still supports two more rate hikes. ​ If gold selling accelerates, it could get ugly as major support won’t appear until the $1900 region. ​  

Oil remains choppy but flat and in lower range Oil prices are relatively flat today, mirroring yesterday’s session which was broadly choppy but ultimately directionless. Crude has rebounded strongly since falling toward its 2023 lows early last week but remains in its lower range, roughly between $70-$80 per barrel and it’s showing little sign of breaking that in the short term. While some believe the market will be in deficit later in the year, aided by the Saudi-driven OPEC+ cuts, which could support prices closer to what we saw late last year and early this, the economy remains one significant downside risk to this amid an adjustment in the markets toward higher rates for longer.   Gold drifting as we await more data Gold has started the week slightly softer but very little has changed, in that it remains in the $1,940-$1,980 range that it has spent the vast majority of the last month. It was a very quiet start to the week which is why gold has basically continued to drift and that may continue until we see a significant change in the data. The Fed last week made it perfectly clear that it doesn’t believe it’s done and its commentary this week, including Chair Powell’s appearing in Congress on Wednesday, isn’t likely to change in any significant way from that. It will be interesting to see if we get any response to UK inflation data as a potential signal of stickiness more broadly but then, there’s every chance it could be viewed as a UK issue, rather than an indication of something more, considering how much more the country has struggled until now.  

Gold has been trading in the sideways range at the price of $1.950 but I see potential for the downside movement towards support of the trading range. Due to the weak demand after the mark up phase from lat week and rejection of the supply trend line, I see potential for the downside movement towards lower references. Downside objectives are set at the price of $1.930 and $1.894 MACD oscillator is showing neutral reading with no defined momentum. Key resistance is set at the price of $1.970 and $1.985 Read more: https://www.instaforex.com/forex_analysis/328038

The XAU/USD chart shows a bearish momentum within a descending channel, indicating a predominant downward trend.       here is potential for a bearish reaction at the first resistance level of 1966.26, leading to a price reversal towards the first support level at 1933.95. Additional support is observed at 1914.16, offering significant buying opportunities. The resistance levels at 1966.26 and 1980.08 present obstacles for upward movement. Monitoring these levels can provide valuable insights for trading opportunities in the XAU/USD market.  

In the wake of the recent Federal Reserve (Fed) decision and its implications for the financial markets, we reached out to experts, analysts, and economists from HF markets to gain their insights on the current situation. Our focus revolves around two key areas: the Fed's decision and its impact on the gold market. With these topics in mind, we explore the potential outlook for gold prices in the coming weeks and discuss the market's response to the FOMC (Federal Open Market Committee) decision.   Gold Market Analysis When considering the trajectory of gold prices in the near future, experts express skepticism regarding the likelihood of reaching a new all-time high for XAU. While certain central banks, including Turkey, China, and India (which added 2 tonnes to its reserves in May), have increased their gold purchases to diversify their reserves away from the US dollar, investors, speculators, and hedge funds focus on other factors. Notably, gold is currently trading at a premium compared to its valuation against the US 10-year real interest rate. Recent price movements indicate a potential further decline, with a possible target range of $1860 or even lower to $1785. FXMAG.COM: Could you give as your point of view about how the gold prices would behave in next weeks? Is there a chance that there will be new ATH? Marco Turatti – HFM Market Analyst: It seems unlikely that we will see a new all-time high for XAU soon. Its price has so far been supported by increased purchases by certain central banks, such as Turkey, China and others (India added 2 tonnes to its reserves in May). The aim is to differentiate its reserves from the USD.  But investors, speculators and hedge funds look at other fundamentals and gold is very expensive compared to where it should trade against, for example, the US 10-year real interest rate. Just today it broke $1940, and could continue to the $1860 zone, if not lower to $1785.    Fed's Decision and Market Reaction Regarding the FOMC decision, experts highlight the surprise factor. Many anticipated that the Fed would approach the peak and initiate rate cuts in the coming months. However, the Fed's stance indicates that the official rate could reach 5.75% in 2023, with Chairman Jerome Powell stating that no cuts are expected for approximately two years. This stands in contrast to the Dot Plot projections. The Fed also expressed optimism regarding the new growth and job outlook.     FXMAG.COM: Could you please comment on the FOMC decision? Marco Turatti – HFM Market Analyst: The Fed really surprised: a lot of people thought we were close to the peak and ready to cut rates this year, but this is not the case. The official rate will probably reach 5.75% in 2023 and Jerome Powell says there will be no cuts for about 2 years (which is different from what the Dot Plot says).  They were also quite optimistic about the new growth/jobs outlook. The market didn't really go anywhere: yes, there was a lot of up and down movement in both indices and the USD, but at the end the day it ended with the US500 flat and the USDIndex having recovered 103.  Now there will be time in the coming hours to better process the central bank's message. Today (15/06) we are seeing declines in the stock market futures and this makes sense for equities (also given the emphasis on labour market monitoring, the Fed wants it weaker).  One direct and clear reaction we are noticing, however, has obviously been the rise in rates along the whole curve, which is weighing on gold.

Agriculture – Unica reports higher cane crush The latest fortnightly report from UNICA shows that sugar cane crushing in Centre-South Brazil increased by 5.5% year-on-year to 46.2mt in the second half of May as favourable weather boosts productivity. This was largely in line with the average market expectation of around 46.3mt. Cumulatively, sugar cane crush rose 16.8% YoY to 125.4mt in the 2023/24 season so far. Meanwhile, sugar production rose by 25.2% YoY to 2.9mt in the second half of May, with around 48.8% of cane allocated to sugar production. The market was expecting a number closer to around 2.8mt. Cumulatively, sugar production rose by 37.7% YoY to around 7mt.     Brazil’s agriculture agency, CONAB, has raised its soybean production estimates for 2022/23 as supportive weather conditions resulted in improved yields. In its monthly report, CONAB estimates domestic soybean production to reach record highs of 155.7mt in 2022/23, in line with the average market expectations and higher than its previous estimates of 154.8mt. Soybean production was reported at 125.6mt in 2021/22. Corn production estimates were marginally revised up to 125.7mt for 2022/23 compared to the previous estimates of 125.5mt, hovering below the lower end of the market expectations of 126mt. In 2021/22, Brazil’s corn output was at 113.1mt.

Metals – Aluminium production resumption plans in Yunnan SMM expects that the increase in rainfall has resulted in increased hydropower generation in the Yunnan province in China. It is expected that the local government will issue a specific power load distribution notice on 15 June. As per the reports, aluminium smelters in Yunnan would be allowed to resume 20% of the halted capacity and further resumption will depend on future power supply. As of 12 June, installed aluminium capacity in Yunnan stood at close to 5.6mt (including 400kt to be transferred), while operating capacity was about 3.3mt, with roughly 2mt of capacity being idled.     As per the latest reports, Boliden halted operations at its Ronnskar copper smelter following a major fire incident at the facility located in Northern Sweden. The company further added that the plant’s electronic refinery has been completely damaged and needs to be rebuilt. Meanwhile, an initial assessment indicates that the main part of the smelter production can be resumed within a few weeks, however, it can take several years to bring back operations fully back to normal.     The smelter produced 218kt of copper last year. As for zinc, Boliden announced to temporarily halt production and exploration at its Tara zinc mine in Ireland and would place the mine into care and maintenance within the next month. The decision came as the mine had been hit by operational issues, declining zinc prices and high energy costs. It is Europe’s largest zinc mine with more than 2mt of ore being extracted annually.   Meanwhile, the latest LME COTR report shows that net bullish positions for copper increased by 3,104 lots for a second consecutive week to 45,549 lots as of last Friday. Among other metals, speculators increased their net long positions in zinc by 1,831 lots after declining for two consecutive weeks to 23,350 lots in the week ending 9 June. In contrast, speculators reduced their net long positions in aluminium by 1,725 lots for a third consecutive week to 106,991 lots as of last Friday.  

The Commodities Feed: Oil recovers on demand hopes Prospects of Chinese stimulus and an unchanged demand estimate from OPEC were supportive of oil prices yesterday with ICE Brent recovering to above US$74/bbl. For agriculture, CONAB has raised its corn and soybean production estimates for Brazil on favourable weather.   Energy – OPEC keeps supply demand estimates unchanged OPEC released its latest monthly oil market report yesterday, in which it left global oil demand growth projections unchanged at around 2.3MMbbls/d for 2023 with global oil demand pegged at 101.9MMbbls/d. However. OPEC highlighted the uncertainties to this outlook due to global economic developments and ongoing geopolitical tensions that could change the demand dynamics.   On the supply side, non-OPEC supply growth estimates for the year were left unchanged at 1.4MMbbls/d with global non-OPEC oil supply estimated to be around 67.2MMbbls/d. The group continues to see the requirement for OPEC crude at around 29.3MMbbls/d for 2023 compared to the actual output of 28.8MMbbls/d for the first quarter and 28.1MMbbls/d in May 2023. OPEC’s crude oil production dropped by 464Mbbls/d in May 2023 due to supply cuts from Saudi Arabia (-519Mbbls/d) and the UAE (-140Mbbls/d).     Meanwhile, the API reported that the US crude oil inventories increased by around 1MMbbls over the last week, in contrast to the average market expectations of the addition of around 0.3MMbbls. Cushing crude oil stocks are reported to have increased by 1.5MMbbls. On the products side, API reported that gasoline and distillates inventories rose by 2.1MMbbls and 1.4MMbbls respectively, over the week ending 9 June. The more widely followed EIA report will be released later today.     The latest market reports suggest that the US could purchase around 12MMbbls of crude oil for its State Petroleum Reserves as soft crude oil prices provide comfort on the supply side. The abovementioned figure includes the 3MMbbls of crude oil that is scheduled for delivery in August and another 3MMbbls/d of purchase that the US approved last week. SPR witnessed a withdrawal of around 180MMbbls last year (pushing total SPR inventory to a 40-year low of 354MMbbls currently) due to crude oil supply shortages after the Russia-Ukraine war and these purchases are aimed to refill the inventory.