Oil grinding, gold shows volatility

Oil grinds higher, but consumption fears persist

Oil has ground higher over the past week, but Brent and WTI remain confined within their one-month trading ranges, albeit near the top ends. Hurricane related concerns in the US have shuttered production their, which has likely played the major part in oil’s recent rally. However, doubts over future consumption demand continue to cap oils rally. Those fears are well-founded, with Covid-19 returning in force to Europe and parts of Asia. A lack of follow-on US fiscal stimulus and Covid-19 has torpedoed US airlines plans for mass air travel to restart as well.

Brent crude fell 0.50% to USD45.80 a barrel overnight. Its continued upward progress capped by its 200-day moving average (DMA), which today lies at USD45.75 a barrel. Brent crude needs to move through its 200-DMA and its 5th August highs at USD46.20 a barrel to relight the fire in oil bulls.

WTI crept 0.20% higher to USD43.45 a barrel overnight, as hurricane-related weather in Texas and Florida shutters oil production and refining capacity. WTI is at the top of its one-month range, and well clear of its 200-DMA below at USD41.60 a barrel. It likely has a greater potential to spike higher than Brent at this stage.

Oil markets are steady in Asia as the street watches the progress of the US hurricanes and ahead of Powell’s speech. The severity of the hurricane landfall in Texas is going to be the more potent short-term driver of oil prices.

Gold’s volatile consolidation continues

Gold had another USD50 an ounce range day overnight, finishing the session 1.35% higher at USD1954.00 an ounce. Gold’s volatile consolidation of the past week between USD1900.00 and USD1960.00 an ounce looks set to be completed with Chairman Powell’s Jackson Hole address sure to have gold breaking one way or the other. I am hedging my bets here because I believe that second-guessing the Fed Chairman’s speech, and its possible market-moving effects, are a pointless exercise.

Gold has edged USD10 an ounce lower in Asia to USD1944.00 an ounce as traders’ book short-term profits from the strong move higher overnight. That said, gold should find plenty of willing buyers on dips to USD1935.00 an ounce ahead of the Jackson Hole address, with a break of v1970.00 an ounce likely setting up a short-term test of USD2000.00 an ounce.

For gold investors, patience will be a virtue today and sitting on one’s hands a far better strategy then mind-reading and hope.

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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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