Oil trading in range, gold steady

Oil markets in range-trade mode to end the week

Oil prices finished modestly higher overnight after the US inflation data caused both contracts to spike lower initially. With markets seemingly comfortable with the Fed’s transitory narrative, oil quickly recovered. Brent crude finishing 0.47% higher at USD72.40 a barrel, and WTI closing 0.50% higher at USD70.10 a barrel.

News that Saudi Arabia has unwound all its voluntary production cuts are circulating in Asia today, and that appears to have temporarily pushed oil prices lower. As a result, Brent crude has fallen 0.25% to USD72.15, and WTI has eased 0.15% to USD69.93 a barrel. The reaction is modest, though, and if anything, the price action is bullish. It suggests that the physical market has absorbed extra Saudi production with ease and that demand globally is robust and climbing.

Barring any G-7 surprises and an unlikely US Dollar rally, oil should resume its climb next week. Only a retreat by Brent crude through USD70.00, or USD68.00 a barrel for WTI, endangers the rally. Otherwise, Brent crude should target USD75.00 and WTI USD73.00 a barrel in the week ahead.

Gold remains mid-range

Like oil, gold spiked lower on the initial US inflation releases overnight, briefly falling below $1880.00 an ounce. However, as it became clear that bond markets were unmoved by the data, gold quickly unwound those losses and finished the session 0.50% higher at USD1898.50 an ounce.

With US inflation fears consigned to the dustbin for another month, gold has modestly higher in Asia, reclaiming USD1900.00 an ounce, dead-centre of theUSD1880.00 to USD1920.00 trading range I expected to dominate the week. The FOMC meeting next week is now likely to be a non-event, and barring a sharp rise in the US dollar, gold looks set to test resistance at USD1920.00 an ounce early next week, as the asset price appreciation trade gains new momentum.

Only a fall through USD1860.00 an ounce delays more gains by gold now, and a daily close above USD1920.00 signals more gains to USD1960.00 an ounce.

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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