Oil and gold drifting in thin trade

Oil markets drifting ahead of year-end

Oil markets continued to range trade overnight and this morning in Asia, preferring to wait for more directional input next week. That said, both Brent crude and WTI remain near the top of their 9-month ranges, suggesting that markets believe the global recovery trade will resume in earnest sooner rather than later.

Brent crude rose 0.45% overnight to USD51.10 a barrel, with WTI rising 0.85% to USD48.10 a barrel after API Crude Inventories fell much more than expected. In Asia today, the more positive sentiment sweeping across markets has lifted both contracts. Brent crude has risen 0.30% to USD51.30 a barrel, with WTI climbing 0.35% to USD48.25 a barrel.

With liquidity sharply reduced, the risk increases that a heavily long speculative market could see some position reduction into the close tomorrow, especially if official US Crude Inventories unexpectedly rise this evening. US data and the Georgia Senate vote also loom as potential risks, although a backtrack by the US Senate Republicans on stimulus payments would be a strong positive.

Brent crude will probably range between USD50.50 and USD52.00 a barrel into New York, with WTI likely confined to a USD47.50 to USD49.00 a barrel range.

Gold consolidation continues

Gold rose 0.25% to USD1875.00 an ounce overnight, pushing 0.30% higher to USD1884.00 an ounce in Asian trading this morning. It appears that some year-end risk hedging by investors is supporting prices in Asia. Nevertheless, even after the rise today, gold remains content to drift in the middle of its range for the week.

Gold is lacking momentum to make a directional move one way or the other for now. It is likely to remain confined within a USD1860.00 to USD1900.00 range into the close of the week. Next week brings more event risk, which should see volatility increase. Resistance lies at USD1896.00 an ounce, its 100-day moving average, followed by USD1905.00 an ounce. Support appears initially at USD1870.00 an ounce, followed by the USD1855.00 to USD1860.00 an ounce region.

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