Oil and Gold Consolidate Gains

Oil and Gold had relatively calm sessions overnight with both crude and gold quietly consolidating their recent gains ahead of Jackon Hole.

OIL

Oil prices rose by just over one percent overnight as the Energy Information Administration (EIA) Crude Inventories showed a drop of 3.3 million barrels, continuing the trend of declines of  crude oil in storage in the U.S. Although the number was slightly less than predicted, crude also got a boost from continued supply disruptions in Libya as well as potential weather related disruptions in the Gulf of Mexico.

The street appears to be in a wait and said mode now, firstly from Yellen’s keynote speech at Jackson Hole, and secondly for more substantial evidence of OPEC compliance and a tightening of supplies globally rather than just the United States. The market seems unwilling to pull the trigger and test higher ranges on either Brent or WTI until this happens, even as the short end of the Brent futures curve moves into backwardation.

Brent spot is trading flat at 52.65, just below its upper range boundary at 52.70. A break opens up a test of 53.50 as Brent’s price action and premium over WTI spot continues to be the more constructive of the two. Only a move below 51.20 would shake confidence at this stage.

WTI spot is also flat from its New York close at 48.20. The short term technical show a converging triangle with lower and upper boundaries at 47.65 (also the 100-day average) and 48.50. A break of either level opens an extension of the price action below 47.00 and above 49.00 respectively.

GOLD

The summer doldrums continued overnight as gold produced a sideways day ahead of the start of the Jackson Hole Symposium. The trend line support, today at 1281.00, remained untested overnight as gold traded quietly higher to close near the top of its range at 1288.00.

Ms. Yellen’s speech will decide the near term fate of the U.S. dollar and thus gold as well so patience will be required until her keynote speech tomorrow.

In the meantime, however, gold’s price action continues to be constructive as its quietly goes about its work consolidating the gains of the last ten days. Resistance appears initially at 1296.00 followed by the Friday high at 1301.00.

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