Oil falls on China fears, gold eases

China worries push oil lower

Oil prices consolidated their week’s gain on Friday, Brent crude closing at USD 119.25, and WTI closing at USD 112.65 a barrel. The Shanghai rolling lockdowns have prompted some consumption fears in China and pushed oil prices lower today. Brent crude has fallen by 1.70% to USD 117.25, and WTI has dropped by 2.0% to USD 110.40 a barrel.

Oil is already taking back some of those early losses and the fall is likely to be a temporary aberration. However, if Covid restrictions spread in China, that could be enough to cap price rises this week, especially with less than stellar data from the US and Europe at the end of last week.

Brent crude has resistance at USD 124.00 and support at USD 112.00 a barrel. A wide but real range that could cover oil prices this week. WTI has resistance at USD 116.00 and support at USD 107.00 a barrel. In the bigger picture, I still believe that Brent crude will consolidate in a broader USD 100.00 to USD 120.00 range.

Gold eases in Asia

Gold prices finished almost unchanged in New York on Friday at USD 1958.00 an ounce, taking their cues from a sedate US dollar, rather than US yields, which climbed once again. In Asia, the US dollar has sprung higher on Japanese JGB intervention and European escalation concerns regarding President Biden’s weekend comments. That has pushed gold 0.76% lower to USD 1943.00 an ounce in Asia.

I believe downside risks persist in gold from these levels. The weakness of gold bugs to wear intra-day losses aside, gold has been rising even as the US dollar stays elevated and while US yields continue to rise sharply across the curve. It can’t all be explained by haven flows. Gold either knows something the rest of us don’t, or higher US yields and a higher US dollar will exact their pound of flesh on gold prices.

Gold has nearby resistance at USD 1965.00 and USD 1975.00 an ounce, followed by USD 2000.00 where I expect option-related sellers to be lying in wait once again. Support lies at USD 1938.00 and USD 1910.00 an ounce.

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