Oil rises, gold slips after rally

Oil prices rise in Asia on China weather

Oil prices weathered the US data storm on Friday, with Brent crude and WTI almost unchanged, consolidating at the top of their ranges. Brent crude closed at USD 82.55, while WTI closed slightly higher on the day at USD 79.40 a barrel. One storm they are not weathering is the heavy flooding in China’s Shanxi province, a coal mining hub where 60 mines have had to cease production. That has sent oil prices sharply higher today. Brent crude has rallied 1.40% higher to USD 83.70 a barrel, while WTI has leapt 1.80% higher to USD 80.95 a barrel.

Brent crude has taken out last week’s double top at USD 83.50 and is likely to test USD 88.00 a barrel this week. Support appears at USD 82.00 and then USD 80.00 a barrel. WTI has chopped through resistance at USD 80.00 and is moving through USD 81.00 a barrel as I write. Dips to USD 80.00 and dips to USD 78.50 a barrel will be well supported. Only a fall through USD 75.00 changes the bullish technical picture which shows no meaningful resistance until USD 90.00 a barrel. Interesting times.

A US holiday is reducing liquidity but the scramble for energy supplies by Asia and Europe in natural gas and coal markets continues to provide a strong backstop for oil prices, especially with OPEC+ showing no signs of increasing production.

US bonds repel gold recovery rally

Gold rallied strongly on Friday, rising over 20 dollars to test USD 1780.00 an ounce. However, the US Non-Farm Payrolls kept the Fed taper trade alive and saw US bond yields rise once again. That was enough to sap fragile confidence in the gold rally, which gave back all its intra-day gains to finish just 0.10% higher at USD 1757.20 an ounce. An ebbing of the fear gauge in Asia, where equities have powered higher, has unwound some haven buying of gold and sees it 0.10% lower at USD 1755.00 an ounce.

The failure of the gold rally will have disappointed gold bulls and made them more nervous about committing to new longs once again. However, I believe that with the US dollar potentially correcting temporarily lower this week, gold will find plenty of support of dips this week. The US bond market closure for a holiday today will help gold’s cause in that respect.

That is all predicated on US yields trading sideways this week, but if so, gold should trade in a USD 1740.00 to USD 1780.00 an ounce range with an upside bias. Critical support lies at USD 1720.00 an ounce, while the USD 1800.00 region, with the 100 and 200-day moving averages (DMAs) each side of it, remains a formidable barrier.

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
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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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