Oil range-bound, gold calm

Oil remains in range-trading mode

A weaker US dollar on Friday, following robust US PMI data, allowed the global recovery trade to move into the ascendant. That lifted oil prices as well, with Brent crude rising 0.44% to USD66.00 a barrel and WTI climbing 0.75% to USD62.10 a barrel.

Both contracts have eased by 15 cents a barrel in muted Asian trading, and in the bigger picture, the end-of-week price action left both contracts smack bang in the middle of their two-week ranges. The monthly OPEC+ meeting this week should be a non-event, with the Russians telegraphing as much last week. Production rises commence from next week, and that will probably serve to mute gains until markets see what effect, if any, they immediately have. Covid-19 issues worldwide, notably India, are also tempering the animal spirits of global recovery bulls.

Brent crude is trading in a broad USD64.00 to USD68.00 a barrel range, and WTI between USD60.00 and USD64.00 a barrel. A break of either side of those ranges will dictate oil’s next directional move. In the meantime, I expect both contracts to bounce around noisily between those broader support/resistance levels.


Gold suffers palladium blues

Despite US yields and the US dollar remaining subdued on Friday, gold struggled to hold on to its recent gains. By the end of the session, gold had retreated by 0.40% to USD1777.00 an ounce, although it has crept back above USD1780.00 in Asian trading today.

Notably, gold once again attempted an assault on the USD1795.00 an ounce region, which was repulsed. Gold has now traced out a triple top between USD1796.00 and USD1798.00 an ounce.

I suspect that gold’s lunch may have been eaten by the platinum group metals, which recorded huge gains last week and finished Friday on an equally strong note. Platinum, particularly, rose by 2.0% to USD1231.00 an ounce, and Palladium was rising to just shy of USD3000.00 an ounce. Both metals are 0.50% higher again in Asia, lifting gold slightly by association, as supply constraint concerns continue to squeeze prices.

With so much one-directional volatility amongst the Platinum group last week, one side effect may have been to divert the fast money that would typically play in gold and silver markets for more fruitful hunting grounds. That lack of participation may have sapped the bullish momentum of gold even as US yields and the greenback give plenty of reasons to be long it.

Gold has initial support at USD1769.00 and USD1763.00 an ounce, followed by the 50% Fibonacci at USD1760.00 an ounce. The triple top between USD1796.00 and USD1798.00 an ounce, USD1800.00, and then the 100-DMA at USD1802.50 an ounce now forms a formable layer of resistance to gold’s advance. Realistically, gold needs to close above the 100-DMA in the next couple of days, or the danger will increase that a washout of speculative longs will occur.

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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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