Oil rebounds, gold recovers after retreat

Oil reverses New York losses

The US dollar strength seen on Friday in New York was enough of an excuse for traders to lock in some profits on long oil positions. Both contracts easing slightly on Wall Street. Brent crude fell 0.55% to USD69.10 a barrel, and WTI retreated by 0.50% to USD65.60 a barrel in what was a quiet session by recent standards.

Asian markets have been in buy-the-dip mode, though, with both contracts rising today, unwinding Friday’s losses. Both have advanced 1.05% to USD69.90 and USD66.25 a barrel, respectively.

Brent crude remains on target to retest USD71.50 a barrel and WTI USD68.00 a barrel, possibly this week. Futures spreads remain in backwardation, and dips in prices remain shallow and short-lived. Brent crude has support at USD68.00 a barrel, and WTI has support at USD63.00 a barrel. Both will find a procession of willing buyers if those regions are visited.

Is gold finally bottoming?

Gold spiked at low as USD1700.00 an ounce on Friday after US bond yields exploded higher. Intriguingly, it rallied back just as hard, despite US yields remaining firm, and actually recorded a modest gain of 0.25%, or USD1727.00 an ounce, for the day.

This is the first time in recent memory that I can recall gold not wilting in the face of such moves and behaving like the inflation hedge that so many of us expect it to be. Gold is unchanged in dull Asian trading, and if it is yet early days, but gold’s price action from here deserves to be closely monitored and could be hinting that a material bottom has formed.

Gold has support at Friday’s low of USD1700.00 an ounce, with resistance at USD1740.00 an ounce, followed by the USD1760.00 an ounce Fibonacci break-out. Gold’s relative strength index is comfortably in neutral territory, giving the yellow metal plenty of room to manoeuvre as well. If US yields push higher this week and gold at least holds at these levels, the case for a material rally will become compelling.

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