Oil jumps, gold under pressure

Oil markets remain volatile

Oil prices spiked overnight, led by a combination of Shanghai reopening, potential gas supply disruption through Ukraine, Russian sanctions on EU energy entities and a plunge in gasoline inventories in the US. Brent crude rose 5.90% to USD 107.50, and WTI leapt 6.60% higher to USD 105.50 a barrel. In Asia, the risk aversion selling sweeping other asset classes in Asia today has pushed oil prices slightly lower. Brent crude fell 1.20% to USD 106.25, and WTI fell 1.10% to USD 104.40 a barrel.

With tensions seemingly ratcheting higher after Russia sanctioned ex-Gazprom JVs in Europe, along with reduced trans-Ukraine pipeline flows, there is limited downside for oil prices in the near term. The continuing squeeze on US gasoline, diesel and other distillates is another supportive factor.

Brent crude has formed a nice trendline support going back to January 2022 at USD 101.50, while WTI has formed the same pattern at USD 98.50 a barrel. Resistance remains at USD 114.75 and USD 111.50 a barrel respectively. Failure of the respective USD 101.50 and USD 98.50 trendline supports is likely to provoke a much stronger test of USD 100.00 for Brent, and USD 95.00 for WTI this time around. Eastern European tensions mean this is not my base case, however. I am sticking to my broader calls for the past two months. Brent crude remaining between USD 100.00 to USD 120.00, and WTI between USD 95.00 and USD 115.00 a barrel.

Gold survives another day

Gold probed the downside overnight, testing support in the USD 1835.00 an ounce region, before rallying to a 0.75% gain, closing at USD 1852.00 an ounce as US yields fell and risk-hedging flows appeared. In Asia gold is relatively quiet compared to the volatility seen in other asset classes today. It has edged 0.17% lower to USD 1848.20 an ounce.

Gold’s support critical near-term support remains the triangle apex at USD 1835.00, the breakout of which in early February, signalled the gold rally to USD 2060.00 an ounce. Its importance is confirmed by the nearby 200-day moving average (DMA), today at USD 1836.00 an ounce. A daily close under USD 1835.00 would be an ominous technical development.

Failure of USD 1835.00 sets up a test of support at USD 1820.00 and then potentially USD 1780.00 an ounce. Failure of the latter suggests a deeper correction to USD 1700.00. Gold has resistance at USD 1860.00 and USD 1884.00 an ounce, its 100-day moving average.

If the risk-aversion selloff sweeping other asset classes, notably cryptos, accelerates, gold does stand to benefit. Especially is haven buyers also pile into US bond markets, pushing the US yield curve lower.

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