Oil and gold slide, US dollar rises

Oil catches OPEC-itis

Oil prices retreated once again overnight, another divergence from the buy everything playbook that has served the FOMO herd so well these last 12 months. Brent crude fell by 1.85% to USD63.20 a barrel, easing further to USD62.80 a barrel in Asia. WTI fell by 2.20% to USD60.20 a barrel overnight, easing below the USD60.00 mark to USD59.80 a barrel in Asia.

The chief concern weighing on oil markets is the looming OPEC+ meeting on Thursday. Expectations are rising that OPEC+ will ease the production cuts further. That is my opinion as well, although OPEC+ has surprised us before. The clamour among some members to refill their coffers, is likely to be a more powerful force then complaints externally about tight supplies. In the interests of OPEC+ discipline, the Saudi’s are likely to accede.

With the speculative market heavily long, the past three sessions’ falls look corrective ahead of Thursday’s meeting. Falling oil prices being incompatible with a recovery worldview evidenced by sky-high commodity prices and tightening bond yields.

Brent crude has support at USD62.50 and USD62.00 a barrel, with resistance at USD64.50 and USD67.50 a barrel. Failure of USD62.00 could extend losses to USD60.00 a barrel. WTI has support at USD58.75 and USD57.50 a barrel, with resistance at USD61.00 and USD63.80 a barrel. A capitulation by longs pre-OPEC+ could potentially extend to USD55.00, where bargain hunter can and should be out in force.


Gold’s woes continue

Gold’s woes continue, as it finished the overnight session 0.55% lower at USD1725.00 an ounce. Notably, gold staged an intra-day rally that failed at its USD1760.00 an ounce breakout point before falling fiercely. That is yet another very negative technical development in an increasingly bleak picture for gold.

Gold has continued retreating in Asia in the face of broad US dollar strength. It has fallen another 0.60% to USD1714.30 an ounce today. Gold’s failure at its breakout point overnight is a strong signal that longer-term bullish positioning is throwing in the towel. Instead of gold finding bargain hunters on previous dips to USD1800.00, for example, it is now finding sellers on any meaningful rallies. I also note that the SPDR Gold ETF outflows continue to be heavy, pointing to a further eroding of confidence.

Gold has resistance at USD1725.00 and USD1760.00 an ounce, its 50% Fibonacci and breakout point. Its next support is at USD1680.00 an ounce, the 61.80% Fibonacci retracement. Failure clears the way for deeper losses to the USD1600.00 an ounce region.

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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