Oil prices rise, gold under pressure

Oil’s rally powers on

Positive US data and a fall in EIA crude inventories were enough to maintain oil’s upward momentum overnight. OPEC+’s JTC produced no surprises, and the EIA said total crude inventory stocks have fallen to a 10-month low. Brent crude powered 1.50% higher to USD58.10 a barrel, and WTI rallied 1.60% toUSD55.95 a barrel.

Asian markets have added another 0.25% to both contracts this morning as global recovery hopes take a front seat once again, and gold weather persists in Northern Asiana in the United States.

Brent crude’s next technical target is USD60.00 a barrel, with previous resistance levels at USD57.40 and USD56.60 providing support. WTI’s technical picture also targets the USD60.00 a barrel region, with previous resistance levels at USD54.45 and USD54.00 a barrel its crucial pivot level.

 

Gold’s soggy price action continues

Although silver eked out a minuscule 0.75% gain overnight, gold’s lethargic price action continued. Gold fell 0.22% to USD1834.00 a barrel overnight. It has eased another 0.55% to USD1824.00 an ounce in Asia as silver falls by over 1.0%.

The momentum in silver has vanished as quickly as it began as the Reddit army learned a harsh lesson attempting to squeeze liquid assets. The rear-guard talk that silver represented an undervalued asset is complete nonsense. Silver is undervalued only in that it is cheaper per ounce than gold. A look at the gold/silver ratio, today at 68.50, shows it is not far from its multi-year average, even stripping out the March 2020 spike. Additionally, I do not doubt that producers were falling over themselves to hedge future production into the Reddit-driven spike, yet another harsh lesson in demand and supply.

Notably, gold continues to fall faster when silver drops than when silver rises. US yields rose overnight, dealing another blow to gold longs, and if they continue to move higher into tomorrow’s US data, gold will suffer.

Although gold has fallen through support at USD1830.00 an ounce this morning, no doubt triggering some stop-losses, I still expect it to trade in a USD1800.00 to USD1850.00 an ounce range for the rest of the week. The Reddit carnage in silver will also continue, capping gains. The cyclical low and 61.80% Fibonacci at USD1760.00 remains gold’s must hold zone.

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
Jeffrey Halley

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