Oil steady, gold holding at USD 1900

Oil Markets Remain Firm

Oil prices edged higher again overnight as the unilateral production cuts by Saudi Arabia continue to underpin markets. The stimulus exuberance seen in US equity markets did not entirely translate to the energy sector, but both Brent and WTI still managed to creep higher. Brent crude 0.50% to USD54.45 a barrel and WTI rose 0.80% to USD50.80 a barrel. Asian trading has been quiet, but both contracts have added another 10 cents a barrel this morning.

With supplies now being squeezed, both contracts have every chance of maintaining their impressive two-month price gains, as the world recovery continues to accelerate. Brent crude’s next target is USD60.00 a barrel, with only a retreat through USD50.50 a barrel calling the rally into question. WTI, having broken through the USD50.00 a barrel barrier, should now target USD55.00 in the weeks ahead. Critical support is distant at USD47.00 a barrel. Saudi Arabia appears to be aiming for a USD55.00 to USD60.00 a barrel range for Brent crude. Enough to fill the depleted coffers of OPEC+, but not enough to have the barbarians of US shale storm the gates.

 

Gold holds nervously above USD1900.00

US yields continued to grind higher overnight, lifting the US dollar and forcing gold into a modest retreat. Gold fell 0.30% to USD1913.50 an ounce overnight, edging lower to USD1909.00 an ounce in Asian trading.

Gold has now fully unwound its rally from Monday and now sits just above some critical support levels. Initial support is at USD1900.00 an ounce, just ahead of its 100-day moving average (DMA), at USd1894.00 an ounce. Gold has consolidated around these levels over the past few days, suggesting that there are plenty of buyers around just ahead of USD1900.00 an ounce, even if it lacks upward momentum.

Gold is very sensitive to the US 10-year yield. If the 10-year yield keeps rising, gold could seriously threaten support. That could lead to a much deeper capitulation correction. Failure of the 100-DMA implies a deeper sell-off targeting the USD1850.00 region. Resistance remains around the USD1960.00 level, and I expect gold to range between USD1900.00 to USD1930.00 an ounce until the Non-Farm Payrolls this evening.

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
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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