Oil slides, gold rally continues

Oil prices slump overnight

Although OPEC+ was a damp squib, rising recession fears saw oil prices slump once again overnight after a negative global outlook from the Bank of England policy meeting. Both Brent crude and WTI have now comprehensively broken lower through their 200 DMA’s, a negative technical development. Although Saudi Arabia continues raising prices for their crude grades to Asian and US customers in the real world, futures markets suggest this may be a last hurrah.

Brent crude slumped by 3.55% to USD 93.55 a barrel overnight. WTI fell by 3.10% to USD 88.00 a barrel. In Asia, the overnight dip in prices has been irresistible to local buyers, sending Brent crude 0.75% higher to USD 94.25 and WTI 1.00% higher to USD 88.90 a barrel.

Brent crude broke below its 2022 uptrend at USD 109.00 in early July, and it seems unlikely we will see USD 110.00 Brent again this year, barring Eastern European shocks. The 200-DMA at USD 98.35 is the initial resistance, followed by USD 102.50 a barrel. Support is at USD 93.55, and failure clears the road to USD 90.00 a barrel. Failure of USD 90.00 could trigger another wave of capitulation selling.

WTI’s 2022 trendline failed at USD 108.35 in early July, never to be seen again. US recession fears continue to weigh on WTI prices. Resistance lies at USD 95.20 barrel, the 200-DMA, followed by USD 102.00. Support is at USD 87.50 and then USD 82.00 a barrel.

As noted in earlier newsletters, the avalanche of USD 200.00 a barrel, end of the world Brent crude forecasts, proved an uncannily accurate indicator of the impending peak in oil prices.

Gold rallies, did I just say that?

My four days away in Bali have seen gold’s impressive recovery rally continue. Overnight gold rose an impressive 1.45% to USD 1791.50 an ounce, edging to USD 1792.00 an ounce in Asian trading. It continues to benefit from a weaker US dollar, in turn, driven by falling US bond yields, as markets continue to price in peak inflation and a US recession.

Notably, gold prices based, mid-July, at critical long-term support at USD 1680.00 an ounce. The ensuing rally remains a powerful bullish technical pattern which seems to be now attracting plenty of interest. Gold should remain well supported on dips to USD 1775.00 now, with a test of USD 1800.00 imminent. ​

Gold’s technical picture suggests it will continue grinding towards the USD 1900.00 region in the coming weeks. Until such a time as bond markets decide that inflation will be stickier than anticipated and yields start to rise again. The first test of that will come in the form of the US Non-Farm Payrolls this evening. A soft US payroll number, though, will likely support gold’s upward momentum, as it is likely to result in another bout of US dollar weakness as yields fall.

My last commentary closes with a bullish outlook on gold; who would have thought?

And with that, dear readers, all I can say is thank you very much; you’ve been a wonderful audience.

Jeff has left the building…….

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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)