US API Crude Inventories and speculators sink oil
Brent crude rose over USD80.50 a barrel overnight before speculative longs rushed into book profits after the US API Crude Inventory data showed a surprise 4 million-plus rise in stocks. Brent crude ended the day down 1.50% at USD 78.20 an ounce. WTI failed ahead of USD 77.00 before falling 1.30% to USD 74.40 a barrel by session’s end.
With the relative strength indexes (RSIs) on both contracts in overbought territory yesterday, the odds of a speculator-driven pullback were high. It is likely to be only a stay of execution though, with natural gas and coal prices high and China’s energy deficit hogging the headlines. The RSIs have moved back to neutral now as well meaning oil from here is likely to be a buy on dips.
Prices are almost unchanged in Asia today, with nearby support in Brent crude at USD 78.00 a barrel. Only a fall through USD 76.00 a barrel will temporarily change the bullish outlook. WTI has support at USD 74.00 a barrel with key near-term support at USD 73.00 a barrel.
Gold sinks on stronger US dollar/yields
Gold fell by 0.90% to USD 1734.00 an ounce overnight before recovering slightly to USD 1738.00 in Asia today. A spike in long-dated US yields and the US dollar as Fed tapering implications started to be priced by markets, pushed gold lower and it is now extremely vulnerable to more US dollar strength. The fallout in gold has been softened slightly by risk-hedging buying, but it appears that if things stay the same, that will only slow gold’s descent.
Gold has now broken through support at USD 1740.00 an ounce which becomes resistance. That is followed by USD 1760.00 and USD 1780.00 an ounce. The overnight low at USD 1728.00 and then USD 1720.00 are initial support. That is followed by USD 1700.00 and then critical long-term support around USD 1680.00 an ounce. Gold looks set to test USD 1700.00 an ounce this week if tapering repricing continues.
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