Oil and Gold Feel The Cold

Oil and Gold’s price action was underwhelming overnight ahead of the Jackson Hole Symposium. Oil will look for salvation from tonight’s inventory data.

OIL

Crude oil contracts closed flat at the end of New York trading after a nascent rally was cut short by the American Petroleum Institute’s (API) Crude Inventory data. Although crude inventories fell by a pleasing 3.6 million barrels, gasoline inventories rose by a surprising 1.4 million barrels, not a good sign during the U.S. summer driving season.

Attention now turns to this evenings official Energy Information Administration’s (EIA) inventory data, with the street looking for drawdowns in crude and gasoline stocks of -3.1 million and -0.5 million barrels respectively. The data will more than likely decide the fate of crude prices this week with a lower than expected drawdown leading to deeper corrections in both Brent and WTI.

Brent spot trades unchanged this morning at 51.55 in directionless trading. Brent’s pricing remains the more constructive of the two contracts due to the backwardation in the front end of the futures curve. But overall, it continues to range trade in a broad 49.70 to 52.70 band, albeit with choppy intra-day price action.

WTI spot also trades unchanged at 47.50 hovering just below its 100-day average at 47.70. Key support comes in at 46.40 with the double top at 48.70 formidable resistance for now.

GOLD

Gold gave up all its previous day’s gains, closing at 1285.00 overnight, as the U.S. dollar and stocks strengthened overnight. This marks the 4th successive failure of gold to close above 1290.00 in a row and the price action will be disappointing to gold bulls, with the street appearing to be in position squaring mode ahead of the Jackson Hole Symposium.

A deeper correction in the short term cannot be ruled out although in the bigger picture gold’s price action remains constructive.

Gold is trading slightly lower in Asia at 1283.50. Initial support will be found at 1280.00 but it is the 1278.00 level that traders will be watching. This is trend line support dating back to early July. A break of this level could imply a deeper technical correction is on the cards to the 1267.00 region.

After the spike on Friday to 1301.00, gold has marked out three consecutive lower daily highs. From a technical perspective gold now needs to see a daily close above 1301.00 to reinvigorate its upward trend.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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.