Oil ticks up, gold looks for direction

US Crude Inventories sparks profit-taking

Official crude inventories rose by more than expected on Friday, mirroring the rise in API inventories two days earlier. That was enough to spark a modest round of profit-taking in North America with extended long-positioning being trimmed. Brent crude ended the day down 1.80% at USD55.10 a barrel, and WTI finished 1.80% lower at USD52.10 a barrel.

China’s ascent to the number one position for global FDI has spurred a modest economic recovery rally in Asian trading. Brent crude rising 0.40% to USD55.30 a barrel, and WTI edging 0.25% higher to USD52.20 a barrel. High LNG prices are persisting in Asia, and that also remains supportive of oil prices for Asian physical buyers.

Today’s rally has lifted both contracts clear of support for now, but any signs of further roadblocks to the Biden USD1.9 trillion stimulus programme could spark more trimming of long positions. Brent crude’s critical support at USD54.50 a barrel survived a brief test on Friday. Failure of the support targets a deeper correction to USD52.50 initially. WTI tested, and briefly cleared, support at USD51.60 a barrel on Friday. The sessions low at USD51.45 is initial support, and failure signals a deeper correction that could extend to the USD50.00 a barrel area.

Like other asset markets, I expect noisy headline-driven trading ahead of the FOMC rate decision and press conference early Thursday morning Asia time.

Gold traders chase their tails

Gold had a volatile Friday session, falling from an open of USD1870.00 an ounce to a low of USD1837.50 an ounce, before finishing the session 0.76% lower at USD1855.00 an ounce. Gold is moribund in Asia this morning, edging slightly lower to USD1854.50 an ounce.

The price action on Friday suggests that gold traders lack directional conviction and have a low propensity to hold positions that move even modestly against them. That led to a tail-chasing session on Friday and a lack of interest in getting involved by Asian traders today.

Gold has resistance at USD1875.00 an ounce, followed by the 100-day moving average (DMA) at USD1883.00 an ounce. Support is at the overnight low at USD1837.50 an ounce. Gold continues to flirt with its 200-DMA at USD1846.00 an ounce today. A daily close below the 200-DMA likely signals another wash-out of speculative longs down to the USD1800.00 an ounce region.

I expect gold to keep chasing its tail this week with an outsized range of USD800.00 to USD1880.00 an ounce entirely possible.

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