Oil rises, gold steady

Oil rallies once again

The fast money FOMO gnomes were out in force once again in oil markets overnight, pushing prices higher despite nothing really materially changing in the world overnight. Gone is the “delta-dismay” of Monday’s speculative-long capitulation, and in with the fear of missing out on the next rally. As I have stated previously, I felt any sell-off would be short in duration, but I will admit oil’s comeback has surprised me and highlights that tail-chasing fast money is what is driving oil prices right now.

Overnight, Brent crude rose 1.95% to USD 73.60 a barrel, with WTI leaping by 2.15% to USD 71.65 a barrel. Both contracts have now recouped all of their losses for the week. The price action has left Asian markets somewhat bemused, with all thoughts of bargain hunting consigned to the rubbish bin. Therefore, regional markets are choosing to sit on their hands today, leaving both Brent and WTI unchanged in early trading.

The massive ranges this week have left the chart picture a bit of a mess. Both Brent and WTI are now effectively unchanged for the week, and on that basis, I believe the best of the rallies are over for now in the short term.

Brent crude has resistance nearby at USD 74.00 a barrel and WTI at USD 72.00 a barrel. I believe as we run into the end of the week, both contracts will struggle to sustain gains above those levels unless we get a news headline surprise. Brent crude has immediate support at USD 72.00 a barrel, while WTI’s support is at USD 70.00 a barrel.

Gold tests support once again

Gold once again probed downside support overnight, but the 100-DMA held, and gold ended a non-descript session 0.17% higher at USD 1806.50 an ounce. In equally directionless Asian trading, gold has faded slightly to USD 1803.50 an ounce this morning.

The 100-DMA, today at USD 1796.25 an ounce, continues to provide quite solid support and has comfortably blocked any deeper sell-offs over the past two weeks. However, I note that the rallies are getting ever shallower with gold now, tracing out a series of lower highs over this week. That, I believe, is signalling those risks are increasing for a deeper gold sell-off, as the US dollar stays firm and even as US bond yields fall, which should be supportive.

A daily close below USD 1790.00 an ounce will signal a deeper correction that could reach as far as support at USD 1750.00 an ounce, especially if stop-loss sellers are forced to the market. Above, gold has resistance at USD 1810.00 an ounce, followed by the 200-DMA at USD 1824.00 an ounce. Only a daily close above the 200-DMA will shift the bearish outlook.

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