Oil and gold drifting at start of week

Oil watches from the sidelines

Having staged the mother of all “delta-dips,” followed by the mother of all FOMO buy-the-dip rallies last week, oil now finds itself roughly where it was post-OPEC+ the previous week. Brent crude on Friday was hardly changed, closing at USD 74.15 a barrel, while WTI finished barely moved at USD 72.05 a barrel.

Although not directly impacting oil consumption patterns, the nerves sweeping China markets have been enough to see investors mark oil down in Asian trading. Fears growing that the government clampdowns will impact growth. Both Brent crude and WTI have retreated by 0.75% to USD 73.60 and USD 71.50 a barrel, respectively.

The USD 74.00 region for Brent crude, and USD 72.00 for WTI, look like equilibrium levels. Both contracts should continue to consolidate their gains, with volatility much reduced from last week. As such, I am not expecting any fireworks until after the FOMC conclusion. Brent should trade in a USD 73.00 to USD 75.00 a barrel range, and WTI should remain in a broader USD 71.00 to USD 73.00 a barrel range.

Gold catches a modest haven bid

Gold once again tested support at USD 1790.00 an ounce on Friday, only to rally back to USD 1800.00 an ounce in another positive technical development. Today, the travails in China’s stock markets have seen both digital currencies and gold receive some haven inflows. Gold has risen 0.30% to USD 1807.00 an ounce.

Gold remains mostly off investors’ radars, with most of the action occurring in other asset classes. It remains confined in a broader range bounded by its 100 and 200-DMAs at USD 1797.00 and USD 1823.00 an ounce, respectively. Gold has also traced out clearly denoted support at v1790.00 an ounce, while it has interim resistance at USD 1810.00 an ounce.

A daily close below USD 1790.00 an ounce would suggest that a deeper correction to the critical support at USD 1750.00 an ounce is happening. However, the charts indicate that gold is, in fact, quietly consolidating at these levels in preparation for a resumption of the longer-term uptrend. A close above the 200-DMA would signal this has started. In the meantime, playing the range and patience are the orders of the day.

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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