Gold hits new record high, oil stays flat

Oil remains side-lined as feathers fly elsewhere

Oil prices were almost unchanged overnight, as the attention of investors remained elsewhere. Brent crude closed at USD45.10, and WTI closed at USD41.95 a barrel, with both contracts content to consolidate their modest gains this week. Oil prices continue to be held in equilibrium by US consumption fears on one side, and a weaker US dollar on the other.

In keeping with the generally negative tone across Asia today, both contracts have eased slightly by 20 cents a barrel on modest volumes. Asia is, yet again, content to take its lead from North American markets. If nothing else, oil’s steadiness at these levels is a modest positive, given the rise in the US dollar and the retreat by equities. That suggests that plenty of buyers are around to buy dips. With Japan and Singapore on holiday on Monday, local traders are reluctant to position one way or the other aggressively.

Oil’s confidence will also be tested by the Non-Farm Payrolls this evening, as well as geopolitical concerns. A disappointing data print could push both Brent and WTI back into the summer purgatory of their previous one-month trading ranges.

Gold faces a stern test of its resolve

Gold rose again overnight, rallying 1.25% to USD2063.00 an ounce. Gold briefly rose to a new record high at USD2075.00 an ounce this morning, before the flurry of White House pronouncements chopped the legs from the rally.

Gold has now fallen 0.50% to USD2054.00 an ounce, with silver also lower, down 3.0% to USD28.10 an ounce. With the weekend upon us, Non-Farm Payroll data this evening, and the anti-China executive order flurry from the White House today leading to a stronger US dollar, gold and silver face stern tests of their character into the weekend.

Precious metals have shown a robust directional correlation to sharp falls in equity markets this year. Should the equity retreat turn into a rout, both metals may well follow suit, as profitable positions are sold to cover equity losses. That could test just how deep the resolve of bullish investors are. If past performance is anything to go by, the FOMO-nista’s are more likely to charge for the exit door.

Gold has support at USD2035.00 and USD2010.00 an ounce, while silver has critical support at USD26.0000 an ounce. Selling pressure will persist in Asia and Europe as investors look to reduce event risk into the weekend. Assuming the Non-Farm Payroll numbers perform as expected, any bullish sentiment is likely to be balanced out by geopolitics, into the weekend. It is therefore unlikely that we can expect another day of new highs from either precious metal in today’s session.

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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

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