Few signs of oil rally running on fumes
The rally in oil has been relentless in recent months as economies have continued to reopen, OPEC+ has resisted pressure to raise production faster and crude has been caught up in the energy price surge. The rally still has great momentum, with WTI on course for the fourth day of gains after closing above USD 80 for the first time since October 2014 on Monday.
While you can often see these rallies fizzle out as they become overcrowded – and most seem bullish on oil at this point – that doesn’t appear to be happening yet with the momentum indicators still looking perfectly healthy. Perhaps we’ll start to see that more as WTI approaches USD 84-85 or even $90, but for now, there are few signs of the rally running on fumes.
Of course, there are certain things that could change fundamentally to trigger a correction in prices. Additional supply from Russia, the approval of Nord Stream 2, OPEC+ increasing supply, for example. But equally, and maybe more likely, bullish fundamentals including further energy outages and colder weather could propel it even higher.
Gold range-bound but resisting higher US yields
Gold is making steady gains on Tuesday, but very much remains within its recent range, as traders still appear a little lost on what the future holds for the yellow metal. It seems gold is stuck in a state of paralysis at the moment as traders weigh up where exactly it sits in a slower growth, increasingly uncertain, tighter monetary policy environment.
For now, we could see further consolidation, with rallies facing resistance around USD 1,775 and sell-offs seeing support around USD 1,750. A significant breakout in either direction could make things a lot more interesting but in the interim, it seems we’re range-bound.
The fact that gold has held up so well as US yields rise is an interesting development in the markets that may suggest gold bulls have the upper hand in the near term, but that’s not what you would typically expect to see and will be an interesting one to monitor going forward.
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