Russia Warning Ignored By Commodities Markets

Russia has warned that U.S. Warplanes over Syria will be considered hostile and is completely ignored by the precious metal and energy markets, which could be bad news for both.

Crude Oil

Brent and WTI were back to business as normal overnight, both falling 1.0% in the New York session as the world’s supply glut continues to weigh on the front end of the futures curve. A hawkish Fed. Governor Dudley didn’t help, his comments sending the U.S. Dollar higher across asset classes leaving crude oil with few friends overnight. Russia’s  Middle East sabre rattling also failed to boost oil, in itself a surprising development which may come back to haunt markets.

Oil must not negotiate tonight’s American Petroleum Institutes (API) Crude Inventories and Gasoline Distillates before we run into tomorrow’s main event, the U.S. DOE Crude and Gasoline Inventories. Trades will be approaching these with some trepidation, with a  blowout in inventories most likely inducing more pain for producers.

Brent spot trades near its New York low at 46.90 this morning with nearby support at 46.60 and just above the May lows at 46.30. A break of the latter is signalling a potential move to the 43.00 regions. Resistance lies at 47.70 and then 49.00, with both starting to look like distant memories.

WTI spot trades at 44.20 this morning, again very near the bottom of its recent range. Initial support lies at 44.00 and then the May low at 43.55 followed by 42.00. Resistance is perched at 45.00 and then 46.50.

Gold

Gold fell another 0.80% overnight continuing gold bulls woes as physical demand from India and China remain on the sidelines. Federal Reserve Governor Dudley started the rot with hawkish comments that saw the U.S. Dollar in general, rally against most asset classes. Much more concerning for Gold bulls should be the ignoring of the market of Russia’s threat to treat U.S. military aircraft over Syrian airspace as hostile. It should have been geopolitical risk bread and butter for gold, but instead, it continued dropping.

Gold is currently trading at 1246.60 on the back of low volume Asian physical buying. The 200-day moving average at 1238.50 the next significant support. A daily close below here suggests we could target the May lows around 1214.35.

Gold broke its 100-day moving average at 1246.50. Today this is at 1247.60 which is initial resistance followed by the  1251.50 regions.

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