Oil retreats, gold consolidates

Oil retreats on growth concerns

Oil is lower in Asia today following a very quiet Friday session in New York, where both Brent crude and WTI finished ever so slightly lower. Oil markets have ignored news that Saudi Arabia’s King Salman has been admitted to hospital for medical tests. Far more concerning to participants today is the growing realisation that the risks of a second Covid-19 torpedo to world growth grow increasingly likely by the day.

Brent crude has fallen 0.50% to USD42.90 a barrel, and WTI has declined 0.60% to USD40.30 a barrel. That brings both contracts closer to their mid-range levels of the past month. At this stage, the falls on Friday and today are limited in scale, suggesting choppy range trading rather than a structural turn in sentiment. The trajectory of the pandemic and a lack of inertia this week in Europe and the United States on the stimulus front could undermine that support.

Critical resistance remains at USD44.00 a barrel for Brent crude and USD42.00 a barrel for WTI. Only a failure of USD40.00 and USD37.50 a barrel, respectively, will disrupt the medium-term recovery picture. In the meantime, more tail-chasing range-trading looks to continue to be the norm for energy markets.

Gold’s consolidation continues

A non-descript session on equity markets and weekend risk hedging lifted gold to the middle of its recent range on Friday. Gold finished the day 12.00 dollars higher, at 1810.00 an ounce. Asia has shown no inclination to rock the boat this morning, with gold sharply unchanged in subdued trading.

Gold has formed support at USD1795.00 an ounce over the past week. However, only a failure of USD1780.00 an ounce calls the uptrend into doubt. That said, gold is lacking momentum to meaningfully push either way now, meaning that the USD1819.00 an ounce resistance zone looks set to continue capping rallies.

Gold has yet to show serious tailwinds from the escalating Covid-19 pandemic concerns, hinting that we have more range-trading days ahead of us this week.

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