Oil and gold record gains

Oil rallies on API inventories

Oil prices rose overnight in line with the general rebound in commodities seen over the past 24 hours. The return of greater China has seen oil prices continue to rise in Asia today. Oil prices were boosted overnight by a dramatic fall in US API Crude Inventories by 6.108 million barrels. But the continuing rise in gas prices is also a supportive factor that will limit losses going forward. Additionally, Reuters reported overnight that OPEC+ compliance had risen to 116% in August and that the grouping was struggling to pump enough crude to meet demand.

Brent crude rose by 0.60% to USD 74.70 overnight, continuing 0.55% higher in Asia to USD 75.10 a barrel. WTI rose by 0.40% to USD 70.85 and has climbed another 0.60% higher to USD 71.25 a barrel in Asian trading.

Notably, WTI held support at its 50 and 100-day moving average (DMA) support zone between USD 69.25 and USD 69.50 a barrel overnight, a positive technical development. Another large fall by official US Crude Inventories this evening could see WTI test resistance at USD 73.00 and USD 74.00 a barrel.

Brent crude has support near its overnight lows at USD 73.30 a barrel, followed by its 50 and 100-DMAs which have converged at USD 72.00 a barrel. A rally through resistance at USD 76.00 sets up Brent crude for further gains targeting USD 78.00 a barrel.

Given the variety of supportive factors in the energy space, notably sky-high natural gas prices, which increase oil’s appeal as a substitute, and robust physical demand, dips in prices right now are likely to be short-lived.

Gold continues to find haven bids

Gold prices rose once again overnight as investors continued to hedge a variety of potential market risks this week including Evergrande contagion concerns, the FOMC, the US debt ceiling and the US spending bill. Gold climbed 0.57% higher to USD 1774.50, edging up to USD 1776.65 an ounce in Asia.

Notably, the intra-day rally in New York overnight failed ahead of formidable technical resistance at USD 1780.00 an ounce. That now becomes an even more important pivot level that could trigger renewed algorithmic buying and see gold retest USD 1810.00 an ounce if overcome. Gold has support at USD 1767.00 and then the double bottom near USD 1740.00 an ounce.

Despite gold’s return from the dead, thanks mostly to Evergrande fears, I remain sceptical about the longevity of the rally. A hawkish FOMC dot plot release tonight, or any signs that China is moving to resolve the Evergrande saga will likely see gold’s rally this week reversed in its entirety.

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