Oil rout resumes as Gold struggles to shine

Oil

It is getting ugly out there and despite a backdrop of geopolitical risks that could squeeze supplies, the latest trade war threats from China could cripple global growth and thus take down oil prices.  West Texas Intermediate crude is down 2.1% off its worse levels, while Brent’s decline is closer to 1.6% as no end appears in sight for the trade war.  Crude is falling through key support levels and is quickly erasing the effects of the OPEC + production cuts. WTI’s end of year rally to mid-April has seen price give back roughly 40% of those gains.

US stockpiles are expected to decline this week, but that may not matter if we do not see some constructive news that trade talks between the two largest economies are poised to resume.  The oil market and all risk assets remain very vulnerable here and we should not be surprise if we see another 5% lower across on the board on further risk aversion flows.

West Texas Intermediate crude is tentatively below the 100-day SMA, which trades at $58.29.  Consecutive daily closes below this level could see further downward momentum target $54.48, which is the 50% Fibonacci retracement of the Christmas eve low to April high.

Gold

Gold rises on trade angst but remains the least preferred safe-haven as investors flee to bonds.  The yellow metal has delivered limited gains on growing recessionary concerns, but that could change on the break of $1,300 an ounce.  The dollar’s run will also hamper gold, but we could see that be coming to an end, or at least a break, when the Fed admits the recent dip with inflation was not transitory.  Rate cuts are priced in by the financial markets, the Fed just needs to capitulate.

The precious metal is also seeing key resistance from the 50-day SMA at 1,290.60. To the downside, the 200-day SMA which is at 1,260.20 remains key support.

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya