Oil jumps, gold prices fall

Oil markets leap higher

Oil markets broke out of their three-week ranges overnight, rallying to multi-month highs. A swing in sentiment back to US stimulus and the global recovery, continued cold weather in the US and Northern Asia, plus a massive fall in US API Crude Inventories by 4.261 million barrels saw oil prices explode higher. Brent crude rose 2.57% to USD57.80 a barrel, and WTI rose 2.80% to USD55.05 a barrel.

The profit-taking selling seen in early Asia has been quickly reversed, leaving both contracts unchanged from the New York close. That has been assisted by a Reuters report saying that OPEC+ now sees a daily oil deficit through the whole of 2021.

Brent crude’s next technical target is USD60.00 a barrel, with previous resistance levels at USD57.40 and USD56.60 providing support. WTI’s technical picture also targets the USD60.00 a barrel region, with previous resistance levels at USD54.45 and USD54.00 a barrel forming technical support.

A large fall in official US EIA Crude Inventories this evening should give oil additional upside momentum. However, some caution about the rally’s pace should be exercised, as the relative strength indexes (RSI) on both contracts are entering overbought territory.

Gold disappoints as silver slumps

The Reddit vigilantes hit market reality overnight, with silver slumping by over 8.0% to USD26.5300 an ounce. The small rally this morning looking more like a dead cat bounce. The silver slump was enough to drag gold lower, falling 1.22% to USD1838.00 an ounce.

Notably, gold has fallen faster than it rallied as it was carried along in silver’s slipstream. That hints that the downside remains the weaker one, particularly with US yields rising slightly and the US dollar staying firm.

Gold has firmed slightly to USD1841.00 an ounce in Asia but has closed well below its 200-DMA at USD1851.50 an ounce, which is initial resistance. Having been boxed in between its 100 and 200-DMA’s for the past month, the break lower is significant. Gold will find some support at USD1820.00, followed by the January lows at USD1803.00 an ounce. Failure of the latter reopens a test of the critical USD1760.00 an ounce region.

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