Non-Farm Payrolls Send Oil and Gold Higher

The Non-Farm Payrolls did oil and gold a favour on Friday, with event risk this week likely to keep gold perky.

Oil

Oil went on a roller coaster ride Friday, with both Brent and WTI dropping by nearly 3 % at one stage before staging a comeback from behind any sports team would be proud of to finish almost unchanged from Thursday.

The initial price action looked suspiciously stop loss driven with Brent falling through 50.00 and then 49.00 and WTI going directly to jail, trading in a straight line through 47.00 and down to 46.50. After the wash-out of the long positioning had been completed, the much lower Non-Farm Payrolls did oil a huge favour as U.S. Dollar weakened across the board.

Both contracts open unchanged from the New York close this morning with several potentially supportive factors out over the weekend. Firstly a Reuters report suggests that the United States is considering sanctions against Venezuela, its 3rd largest supplier of oil. Then the Saudi Energy Minister said that OPEC might consider further cuts in July after an assessment of the market situation. Thirdly, the National Oceanic and Atmosphere Administration (NOAA) are forecasting a much higher than average likelihood of a severe hurricane season in the Gulf of Mexican, potentially disrupting production seriously.

Brent spot rises to 50.00 this morning with support at the overnight low of 48.70 and resistance at 50.30.

WTI spot increases to 47.50 with support at its overnight low of 47.50 and resistance at 48.00 initially.

Gold

Gold surged over one percent on Friday as the U.S. Dollar weakened following a weak Non-Farm Payrolls report. Unemployment fell, but this was not supportive of the Dollar either it was driven by a lower participation rate.

The latest London terror attacks and Thursday’s U.K election will likely provide more support for gold this morning, at least initially, but the overall direction of the yellow metal will be more likely driven by how well the U.S. Dollar comes back, or not, from the poor Friday data. Gold has opened slightly higher from its New York close at 1280.50 today.

From a technical perspective, the trend line support at 1263.60 was briefly broken intra-day on Friday, but gold then recovered handsomely to finish at its highs near 1279. That support line comes in at 1265.20 this morning. Ahead of this gold has interim support at 1270.50.

On the topside, there is no resistance now between gold’s present level at 1280.50 and the April high of 1295.70.

 

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Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.