Oil, gold rise on risk aversion

Oil prices are sharply higher on enhanced sanctions

Unsurprisingly, the sharp escalations in sanctions over the weekend, which sparked panic among ordinary Russians, has seen oil open sharply higher today. Brent crude has soared 3.50% to USD 101.85 a barrel, and WTI has rocketed 4.55% higher to USD 96.10 a barrel.

 

Oil prices are, in fact, slightly off initial highs, potentially on hopes from the Ukraine-Russia meeting, with similar price action seen in equity and currency markets. Volatility is set to continue, with short-term direction at the mercy of headlines from Eastern Europe. A global SPR release is likely to be only a temporary band-aid on what was a tight energy market anyway pre-conflict.

 

Brent crude has well-defined support at USD 96.00 a barrel, with resistance at USD 106.00. WTI has support at USD 90.00 a barrel, with resistance at USD 100.00 a barrel. Bring deep pockets and nerves of steel if you want to play in this market.

 

Gold spikes higher

Western sanctions on Russia were substantially enhanced over the weekend, leading to a risk-aversion sell-off in markets at the Asian open, and a resulting haven spike higher by gold prices. Gold has risen by 1.10% to USD 1911.00 an ounce this morning but is now somewhat lower than its intraday highs around USD 1927.00 an ounce.

 

Gold’s price action is very much following the calming nerves price action seen in other asset classes today, helped along by hopes from the Ukraine-Russia meeting on the Belarus border to come. Gold’s price action disappointed last week, tracing out an outside reversal day, a bearish indicator after it hit USD 1975.00 an ounce on panic buying.

 

That will add an element of caution to gold buyers now and if anything, gold is more acutely vulnerable to any sort of positive news, no matter how tenuous, coming from Eastern Europe. Gold has resistance at USD 1927.00, and USD 1975.00, with support at v1880.00. Failure of the latter could spark a sharp reversal lower potentially extending to the USD 1800.00 an ounce area.

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