Will the Fed raise or lower oil and gold this week?

The Federal Reserve holds its annual rally at Jackson Hole from Thursday to Saturday, with President Jerome Powell to address the forum on Friday. Before that, the central bank will release Wednesday minutes of its July meeting, in which it had lowered interest rates for the first time in a decade.

What will the Fed do to face the risks of a recession?

For the global financial calendar, Jackson Hole's retirement is as important as it is: Investors around the world will be looking at the meeting to better understand future monetary policy.

Powell's speech will be a highlight, but other discussions, even briefly on interest rates, can trigger significant market shifts, especially as investors prepare for a further Fed cut in September. Any reference to a reduction in rates will certainly increase the price of crude and gold.

Even without adding to the central bank's 25-basis-point cut in July, investors will closely monitor the Fed's reaction to fears of recession fueled by the recent reversal of the US Treasury yield curve.

On the radar also: Minutes of the ECB and German PMI

Aside from Jackson Hole, central banks will be monitored this week, with the European Central Bank releasing its July minutes on Thursday, one day after the Fed's.

Although the ECB left rates unchanged last month, it has adjusted its guidance to indicate that rates may fall. This essentially means that the field is ready for a possible reduction in September. He also said he could revive his quantitative easing program in the coming months.

Before the ECB minutes, investors will receive an update on the health of manufacturing and services sectors in the euro area. Data from the German PMI will be closely followed after the contraction of the largest economy in the euro area in the second quarter, fueling fears of a recessionary outlook.

On the US side, market focus will largely be on existing home sales and new home sales, forecast on Wednesday and Friday, respectively. For the moment, both are supported by consumer confidence, rising wages and falling mortgage rates.

Mixed factors for Oil

Volatility swept the rough markets for two consecutive weeks as traders did not know which direction to take.

Last week, the biggest movement occurred between Tuesday and Wednesday: US crude jumped 4% on a postponement of US tariffs on Chinese products before plunging 3% in the following session under the influence of fears recession and rising crude inventories. In addition, the CBOE's volatility index posted its biggest one-day rise since 1 August, rising 8%.

The gyrations came during a week of contradictions with the catalysts for the oil. On Friday, for example, OPEC released a damning report on oil demand for this year and the following year. Crude prices nonetheless rose for a weekly gain, after a "dramatic recovery" in equities, which eased some of the oil volatility.

West Texas Intermediate crude traded in New York ended the week up 0.7% to 54.87 dollars a barrel, while the London traded only gained 0.2% over the week, remaining below bar $ 60 a barrel at $ 58.64.

At the same time, the Chinese Ministry of Finance originally announced last week that it should take action to counter the latest US tariffs due to Chinese imports of $ 300 billion.

Yet in the next 24 hours, the Xi Jinping administration said it hoped to meet Washington halfway in the trade dispute. Of course, Tuesday, Trump had partially withdrawn from its previous plan to impose tariffs by September 1, delaying the rights to December in some Chinese-made items, such as cell phones, laptops and other consumer goods, with the hope of mitigating the impact on holiday sales in the United States.

Gold always shines …

Gold investors, meanwhile, can not be more sure of a rally after several years of false starts.

Wanted both in times of stability, as a luxury product, and panic, as a refuge from economic and political unrest, it is enjoying its best year since its record eight years ago.

The New York Mercantile Exchange's benchmark gold futures contract, which is just below the six-year high of $ 1,525 per ounce, is up 16% since the beginning of the year. year. This is the best annual performance since 2011, when it peaked at $ 1,911.60.

Since the beginning of August, gold has gained more than 6%, about $ 90, thanks to the intensification of trade tensions and sustained purchases by central banks, which have reacted to a series of disappointing economic data. at the World level. Speculative support from hedge funds and the indirect purchase of gold through exchange-traded funds were other important drivers of the recovery.

The strong fundamentals of gold's action and relative prices fueled the technical aspects of gold. Investing.com views Comex gold as a "strong buy" in its day-to-day technical outlook, anticipating a resistance of $ 1,599.24 in the near term.

Some strategists are setting a target of $ 1,820 on gold, and if the latter loses, it could set the stage for the yellow metal to regain its current record or record a new one.

According to Bank of America (NYSE 🙂 Merrill Lynch (NYSE: BAC), a note on precious metals issued last week indicates that central banks could still buy a lot of gold.

… But some buyers are calling for caution

Others have lower targets for gold, although they are a bit bullish.

After daily rises of up to 2% or more in recent weeks, gold purchases have also weakened as investors wait for signs of easing by central banks before engaging in long positions. Because of this, technical strategists anticipate a potential retracement.

Last week's gold auction of Comex below $ 1,526 could be a signal to reduce buying exposures and reassemble protection stops, "said Michael Boutros, gold technical strategist. "Be on the lookout for a possible burnout," he added.