Oil buoyed by China virus containment
Oil prices are making gains once more after a fantastic start to the week. WTI is 1.5% higher after jumping around 6% on Monday as China reported no new Covid cases. Prices have been crushed in recent weeks as a result of the uncertain growth outlook for the world’s largest crude importer so Monday’s news was naturally very bullish.
WTI remains around 11% off its July highs so there’s still plenty of ground to make up. Of course, the global outlook has probably become more uncertain in that time as a result of numerous delta surges, including in the US. So we may not see it fully recoup those losses in the near term.
But there is still room to add to the promising start to the week. It’s seeing some resistance around USD 67 today and we may see similar around USD 68. The big test will come around USD 70, a break of which could be very bullish.
Powell holds the key to gold fortunes
Gold’s resurgence has stalled on Tuesday after it was caught up in the commodity surge at the start of the week. A softer dollar gave commodities a helping hand as risk appetite improved significantly. Gold has found support around USD 1,800 this morning which is encouraging although bigger challenges lie ahead.
While it’s arguably come as a surprise to see gold recapture USD 1,800, the big test will be USD 1,833 where it failed on a few occasions in July and early August. A move above this level would be very bullish and may suggest taper expectations have been pared back. Powell may offer more insight later in the week and any suggestion that it’s less likely this year, particularly in September, could be the catalyst for a breakout.
If gold does break through its recent ceiling, further resistance could lie around USD 1,860, with the summer highs above USD 1,900 then getting a lot of attention.
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