Oil steady, gold under pressure

Oil holds its Monday gains

Oil prices powered higher overnight with Brent crude nearing USD 85.00 and WTI USD 82.00 a barrel as the Asia rally continued into New York. Only a statement by a US official saying stocks could be released from the SPR capped the gains, leading to a small retreat into the close. Brent crude finished 1.33% higher at USD 83.65, and WTI rose 1.25% to USD 80.50 a barrel for the session.

In Asia, prices are almost unchanged. Asia is not chasing prices higher today and part of that reason could be because the short-term technical indicators have entered overbought territory. Combined with reports of huge, long speculative positioning in the futures markets, it would not surprise me in the least, if we saw a sharp sell-off of 5 to 8 dollars a barrel at some stage this week. As I have stated previously though, given the state of play in the physical market, a speculative long culling will be a dip to buy and is likely to be very short-lived in duration.

Brent crude has resistance at USD 85.00 and USD 87.00 a barrel, with support at USD 82.00 a barrel. WTI has resistance at USD 82.00, with support at USD 78.70 a barrel. Once again, watch the relative strength indexes (RSIs) this week. The higher into overbought territory they go, the deeper the short-term correction lower will be.

Gold nervously poised above support

Gold prices edged lower overnight in a dull session, gold finishing just 0.14% lower at USD 1753.50 an ounce before reversing those losses exactly to USD 1757.00 an ounce in listless Asian trading today. Having failed at USD 1780.00 an ounce on Friday, gold is now ominously consolidating at the bottom of its week’s range near USD 1750.00 an ounce.

The US dollar did not continue correcting lower as I expected, and gold can probably thank the US bond market’s closure overnight for not finishing the day much lower. Gold is now in danger of testing support and its fate is entirely in the hands of US yields this evening.

If US yields trade sideways this week, 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, and if US yields rise, it could be tested. The USD 1800.00 region, with the 100 and 200-day moving averages (DMAs) each side of it, remains a formidable barrier.

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