Oil drifting, gold steady

Oil markets are surprisingly quiet

Oil markets traded sideways overnight, with China’s growth fears offsetting a large drop in official US crude inventories overnight. With the geopolitical news ticker fairly quiet, oil markets contented themselves with consolidating the previous day’s gains. Brief forays to the downside were quickly reversed leaving Brent crude almost unchanged at USD 107.30 a barrel, and WTI at USD 102.40 a barrel.

In Asia, the lack of volatility overnight has left local traders in a calmer frame of mind, reducing the inclination to chase prices higher. Brent crude is just 0.40% higher at USD 107.70, and WTI is 0.60% higher at USD 103.00 a barrel. It seems that regional buyers are happy to wait for pullbacks and a quiet session appears likely for Asia.

I continue to expect that Brent will remain in a choppy USD 100.00 to USD 120.00 range, with WTI in a USD 95.00 to USD 115.00 range. Brent crude has further support at USD 96.00, and WTI at USD 93.00 a barrel. A potential European oil embargo on Russia next week after this weekend’s French elections could see a move towards the top of the range.

Gold’s steady overnight

Gold prices remained steady overnight, but notably, it failed to rally as US yields and the US dollar both retreated. Gold booked a modest 0.40% gain to USD 1957.50 an ounce, which it has mostly unwound in Asia as the US dollar rebounds. Gold has fallen by 0.30% to USD 1951.80 an ounce in Asia.

Gold still looks vulnerable and failure of USD 1940.00 could see more speculative long positions getting culled and gold falling to USD 1915.00 an ounce. However, gold’s price action in the past few weeks has been quietly signalling those risks, be they inflation or geopolitical, have been increasing. Nothing I can see has changed that fact, and thus, the deeper correction lower could be an opportunity to load up again at much better levels.

As for the technical picture, gold still has resistance at USD 2000.00 an ounce, and I believe option-related selling there will be a strong initial barrier. However, if USD 2000.00 is cleared, gold could quickly gap higher to USD 2020.00 an ounce, and potentially, retest USD 2080.00 an ounce. Failure of USD 1915.00 and USD 1880.00 could see a deeper loss to USD 1800.00 an ounce.

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