Gold has shot down after the FOMC statement as the Federal reserve has decided to taper the stimulus from $65 billion a month down to $55 billion a month. Since tapering amounts to a reduction in the money supply for the US dollar, the currency becomes scarcer and its value increases. As gold is inversely proportional to the dollar, it tends to fall when the greenback rises. Also, the Fed is considering raising interest rates more than expected over the next few years – indicating that the dollar could appreciate further and that the central bank feels confident about the US economy. Thus, gold’s appeal as a safe haven asset is decreasing. Look for support at 1327.69 and resistance at 1363.21.
Oil has climbed in light of the decision by the Federal Open Market Committee to taper and raise interest rates eventually – ignoring bearish supply data that also came out today. Traders took the decision not to raise rates now as a sign that the dollar will not appreciate too rapidly, and that oil will consequently become more valuable on dollar denominated exchanges. Do note that the movement for oil has not been as drastic as the movement for gold, and that the long term effect on the black liquid from this will be more limited. Look for support at 98.42 and resistance is at 99.23.
March 19, 2014 – Commodities News
Gold has shot down after the FOMC statement as the Federal reserve has decided to taper the stimulus from $65 billion a month down to $55 billion a month. Since tapering amounts to a reduction in the money supply for the US dollar, the currency becomes scarcer and its value increases. As gold is inversely proportional to the dollar, it tends to fall when the greenback rises. Also, the Fed is considering raising interest rates more than expected over the next few years – indicating that the dollar could appreciate further and that the central bank feels confident about the US economy. Thus, gold’s appeal as a safe haven asset is decreasing. Look for support at 1327.69 and resistance at 1363.21.
Oil has climbed in light of the decision by the Federal Open Market Committee to taper and raise interest rates eventually – ignoring bearish supply data that also came out today. Traders took the decision not to raise rates now as a sign that the dollar will not appreciate too rapidly, and that oil will consequently become more valuable on dollar denominated exchanges. Do note that the movement for oil has not been as drastic as the movement for gold, and that the long term effect on the black liquid from this will be more limited. Look for support at 98.42 and resistance is at 99.23.
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