Climate change will be the theme of the day, as the President tweets that He will announce his decision this afternoon, which could see a continuation of both oil and gold’s overnight price action.
Oil’s early week rally came to an abrupt end overnight as increasing Libyan and Nigerian production lit the fuse, and both Brent and WTI plunged nearly 4 percent at one stage. Both managed to rally on intra-day profit taking but still ended up around -2.2 percent for the New York session. Although OPEC cut exempt Libya and Nigeria may have been blamed, I suspect they are more the straws that have broken the camel’s backs, with the technical picture on both contracts starting to look more like a technical consolidation of a bear market rather than a new dawn for bulls.
Traders will now look ahead nervously to this tonight’s U.S. DOE Crude Inventory figures for solace with the market looking for a minus three million drawdown. A greater drawdown may see oil stabilise while a less than expected drawdown could see more downside pain. Ahead of this though President Trump’s announcement on the United States’ future in the Paris Climate Change Accord’s at 3 PM ET in Washington D.C. A withdrawal may be construed as open season on new drilling which in itself may not bring bulls cheer.
Brent spot trades at 50.95 with support at 50.00. A daily close below this level is implying a potentially much deeper downside extension. Resistance is at 52.10.
WTI spot has support at 47.50 and then 47.20. It has resistance at 49.50 and then the magical 50.00 level where significantly, it failed at earlier this week.
If the street needed a clear lesson on gold’s pricing dynamics at the moment, as the geopolitical temperature gauge rose a few notches and gold rallied 15 dollars to 1274.50 at one stage, before settling at 1269.50 in early Asia trading after a very busy New York session. Investors around the world are seeking safe havens ahead of tomorrow’s Non-Farm payrolls and into next weeks U.K. Elections which have gone from a one horse race to an emotionally close one if you believe the polls.
Before this, though we will have President Trump’s announcement of the United States future within the Paris Climate Accords in Washington D.C. A withdrawal in itself shouldn’t be bearish for the U.S. Dollar in isolation; rather it is the intent that it signals. In this case a more isolationist stance from literally, the rest of the world’s view. This could see that geopolitical temperature gauge rise again, taking gold with it.
All of the above and running into the weekend should imply that gold remains bid, if not here than on any significant dips. Gold has a double bottom and ascending trend line support at 1259.00 with resistance at the overnight highs of 1274.50. A break above here may see more stop loss buying enter the market with the next resistance at 1278.50. Traders should expect intraday moves to be very headline driven over the next two days.