Oil edges higher, gold eases lower

Crude Inventories offset OPEC+ nerves

Official US Crude Inventories and Gasoline Inventories fell by much higher than expected totals overnight, leading to an intra-day spike in crude prices. However, subtle hints from Saudi Arabian and Russian officials about oil production and inflation muted the gains. Oil markets shifted higher the probability of a move by OPEC+ next week to open the taps.

Still, Brent crude managed to finish 0.90% higher at 75.40 a barrel, while WTI rose just 0.25% to USD73.25 a barrel. Headlines suggesting that the US is open to continuing nuclear talks with Iran, despite a new hard-line President, has seen oil edge lower in Asia, both contracts shedding 15 cents a barrel.

With OPEC+ to meet next week, the possibility that US/Iranian talks are not dead in the water, and the relative strength index (RSIs) on both contracts in overbought territory, oil is vulnerable to a short-term correction lower after a mighty rally. A speculative long washout should be limited to USD73.00 for Brent crude, and USD70.00 a barrel for WTI. Unless OPEC+ massively opens the taps next week, any material dip should be short in duration.

Gold’s recovery hits a brick wall at 1800.00

Choppy range trading continued in gold overnight, with markets generally struggling to settle on a unifying theme, something that has typified the trading across several asset classes this week. Gold rose seventeen dollars to test its 100-DMA at 1793.00 overnight, only to retreat as Fed Officials Bowman and Bostic comments erred on the hawkish side of the inflation/interest rate divide.

Gold finished almost unchanged at USD1777.00 an ounce, easing 0.30% lower to USD1774.00 an ounce in Asian trading. With a lack of clear direction, and contradictory themes coming from Fed officials, I expect gold to continue its choppy range-bound trading. It is bordered by support at USD1760.00 and resistance at the 100-DMA at USD1793.00, followed by USD1800.00 an ounce. I expect this range to hold until the end of the week.

The market remains nervous about earlier lift-off entrenched inflation-type headlines. Its inflation-hedging correlation being weak versus its correlation to the US dollar and US yields for now. So, gold will stay a sell on rallies, although a weak RSI suggests that gold’s path of least resistance could be higher, given the right driver. That could be a much weaker US Durable Goods print 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
Jeffrey Halley

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