Commodities Markets Digest Fed Tapering Call, Upbeat Outlook

Energy and precious metals resumed the sideways trade on Thursday, digesting an already-priced-in decision by the Federal Reserve to finally start squeezing its quantitative easing program.

Volatility in financial markets eased after the Federal Reserve made the right call on Thursday to start tapering its stimulus plan, kicking off the next year in an upbeat fashion. The commodity market, like others, welcomed the Fed`s optimistic outlook for the US economy and its historical decision to finally start slowing its $85 billion monthly bond purchases.

The Fed, offering detailed policy guidance, plans to let up off the gas very gradually, cutting its stimulus program by $10 billion beginning in January and, depending on the extent of job growth and increases in inflation pressure, will extend purchase cuts at a measured pace in future meetings.

The Fed offered a quite upbeat forecast for the world`s largest economy as well, seeing the possibility of Gross Domestic Product (GDP) rising to the 3 percent area as soon as next year and definitely by 2015 and projecting that the unemployment rate will fall next year to the mid 6 percent range.

In the bullion market, gold fell but not severely and the sideway trade continues be theme of the final quarter this year.

As of this writing, Spot Gold was down 2.00% at $1,207.30 from $1,232.06 an ounce, compared with yesterday’s close at $1,232.00.

Gold recovered slightly earlier today after yesterday’s losses triggered by the Fed’s policy outcome, suggesting that traders may have already priced in the US central bank’s decision. However, worries persist the metal will lose more of its value if the US central bank reduces further liquidity to diminish the risk of inflation.

The yellow precious metal is poised to suffer further losses in this sideway range, with prices expected to break below $1,211 support level that would clear the way a deeper slide, probably towards major low at $1,180.00.

As for oil prices, WTI Crude was little changed at $97.79 from $97.69 barrel, after settling at $97.80 yesterday in New York.

The Fed’s decision to start tapering its dollar-unfriendly stimulus plan propelled traders to seek back US currency, which forced more pressure on the energy markets. However, prices were cushioned by the crisis in South Sudan.

Brent Crude was up around $109.39 from $109.25 a barrel in London, compared with yesterday’s close at $109.63.

US oil prices are expected to be supported around the highest in almost a w3eek after crude stockpiles declined in the US last week, according to data from the Energy Information Administration.

Technically, prices continue to hover within a tight range as well below $98.00 resistance level and above $97.00 support level. The intraday bias remains slightly bullish.