Nervous investors send gold higher, oil down

Profit-taking on oil sets in on US employment nerves

With oil’s upward momentum stalling after both contracts broke monthly resistance this week, it wouldn’t have taken a lot for investors to decide to book profits and reduce risk nervously. The US Initial Jobless Claims duly provided the excuse as both Brent crude and WTI retreated from their week’s highs.

Brent crude fell 2.20% to USD43.45 a barrel, and WTI fell 2.10% to USD41.05 a barrel. Buyers have emerged in Asia with both contracts creeping 10 cents higher in muted trade. The uptrend is intact as long as support at USD42.00 a barrel for Brent crude, and USD40.00 a barrel for WTI hold. A loss of these levels implies that a deeper correction will occur and that the breakout was false.

Both contracts remain vulnerable to negative sentiment from equity markets spilling over to energy. With a light data calendar, US/China headlines will drive intra-day price moves. My underlying bullish outlook remains intact though, viewing the overnight retreat as position trimming and not a turn in sentiment.

Gold powers higher

Gold rose again overnight, even as some long-awaited profit-taking in silver finally appeared. Gold rose to USD1898.00 an ounce in intra-day trading, before fading. It still managed to record an impressive 0.85% gain, closing at USD1887.50 an ounce.

With the US/China noise reaching deafening levels, gold has rediscovered its safe-haven appeal ahead of the weekend. Lower US yields and a weaker US dollar are also supporting prices at these levels. A break of the overnight highs should set gold up for a rapid move to the all-time highs at USD1920.00 an ounce. We would expect some heavy two-way traffic ahead of that level, however, should it break, gold may finish the week scurrying higher.

Gold has support at USD1865.00 and USD1840.00 an ounce. Only a loss of the latter calls the bullish outlook into question now. Gold is unchanged in Asia but should resume its advance once Europe arrives.

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 Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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