Oil slide continues, gold rallies

Oil’s woes continue

Oil prices were crushed again overnight, as Covid-19-induced consumption uncertainty, and the risk of the US elections combined to send oil prices sharply lower again. Brent crude fell 3.75% to USD7.55 a barrel, and WTI fell 3.40% to USD36.10 a barrel.

With a European slowdown jeopardising global consumption and the return of Libyan production, the onus must now fall on OPEC+ to reconsider their 2 million barrel per day production increases in January. The grouping is holding its nerve, for now, hoping that the volatility of the next week can pass without incident, but I suspect that a fall by Brent crude through USD35.00 barrel will force its hand. Oil is unlikely to sustain any rally in this environment short of a statement from OPEC+.

Brent and WTI have edged 25 cents a barrel higher in Asia on profit-taking, but it looks like a dead cat bounce at this stage. The pace of declines may slow though as both contracts relative strength indexes head towards oversold territory. The overnight lows at USD36.65 and USD35.00 a barrel respectively, form the last line of support for both contracts. Any rallies from here look to be rallies to sell into, as we head into next week.


Gold rallies in Asia

Having broken triangle support on Wednesday, gold ominously refused to rally higher with equities overnight. However, in Asia today both gold and silver have moved higher, suggesting that haven buyers are emerging ahead of the weekend.

Gold fell 0.50% to USD1868.00 an ounce overnight, as the US dollar and Treasury yields firmed. But today, gold has recouped all those losses, rising 0.50% to USD1877.00 an ounce this morning. Silver is also outperforming, rising 1.20% to USD23.5350 an ounce.

Gold has resistance at its 100-DMA, today at USD1889.60 an ounce, followed by the triangle base at USD1905.00 an ounce. Initial support is at USD1860.00 an ounce, the overnight low, followed by USD1850.00 an ounce.

Haven buying is expected to increase in the coming days. Although it looks like it won’t be enough to sustain a rally back over USD1900.00 an ounce, it should be enough to at least temporarily stop the rot until the US election passes.

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

Latest posts by Jeffrey Halley (see all)