Oil steady, gold slides

The supply-side squeeze keeps oil prices elevated

Oil prices remained almost unchanged overnight, with Brent crude finishing at USD 122.10, and WTI closing at USD 121.10 a barrel. The continuing squeeze on refined products globally, as well as a lack of investment to bring online more supplies from OPEC members, or other sources, means lost Russian production is nowhere near being covered by global markets. Adding to the noise is news that Libyan production has fallen from 1.1 million bpd to just 0.10 million bpd. Not a game-changer in normal times, but with the current situation, it is certainly enough to keep prices elevated.

In Asia, prices have climbed once again as regional buyers get impatient waiting for a risk-aversion dip to arrive. Brent crude has climbed 0.70% to USD 123.95, with WTI adding 0.40% to USD 121.60. In the near-term, Brent crude has support at USD 119.50 and USD 118.50, with resistance at USD 123.60 and a triple top at USD 124.40 a barrel. WTI has support at USD 118.00 and USD 117.00 a barrel, with resistance at USD 122.25 and USD 123.00 a barrel.

Gold slumps

Gold has once again teased gold bugs, only to whip the rug from under their feet. The huge rise in both US yields and the US dollar was too much for gold to endure yesterday as it collapsed by 2.80% to USD 1819.50. The 50-dollar-an-ounce collapse hinted that once again, the fast money longs were shown the exit door. In line with price moves in other asset classes in Asia, stability in US equity futures has prompted a 0.50% gain to USD 1828.25 an ounce.

The inverse correlation to the US dollar is as strong as ever it seems and the technical picture for gold has turned murky. Only a sharp US dollar correction lower is likely to alleviate selling pressure on gold. Gold has resistance at USD 1840.00 and USD 1880.00, the latter appearing an insurmountable obstacle for now. Support is at USD 1805.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction.

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