Oil prices dip, gold shows gains

Oil markets ease

Oil bucked the post-Fed buy everything trend overnight, with high levels of speculative long positioning, a modest rise in US crude inventories, and persistent third-wave European fears combining to push prices lower. Brent crude fell by 1.05% to USD67.75 a barrel, and WTI fell by 0.65% to USD64.40 a barrel.

In Asia, oil has continued to ease as local buyers hold out for lower prices and the US dollar firms slightly. Brent easing to USD67.55 barrel, and WTI to USD64.20 a barrel.

Brent crude has support at USD66.40 a barrel, and resistance at USD70.00 a barrel. WTI has support at USD63.20 a barrel, and resistance at USD66.40 a barrel. With both contracts drifting towards the lower end of their recent trading ranges, the odds of a washout in speculative long positioning are increasing. Failure of support by either should result in another USD2.0+ move lower on stop-loss selling. However, as stated previously, any sharp dip is likely to be met by an eager wall of physical buyers and will likely be short-lived.

Gold is forming a potentially significant low

Gold once again shrugged higher US bond yields and powered by a weaker US dollar, it rallied vigorously to USD1745.00 an ounce overnight. That has continued in Asia, even as the US dollar firms, gold climbing 0.20% to USD1749.25 an ounce.

Gold continues to show impressive strength, even in the face of previously bearish factors in the shape of US yields and dollar strength. The longer-term charts highlight that gold has formed a bottoming pattern in the 50.0% to 61.80 Fibonacci retracement box of 2020’s rally to USD2075.00 an ounce. A weekly close above the 50.0% retracement at USD1760.00 an ounce will confirm that the downward correction has completed, setting up gold to return to the USD2000.00 an ounce area in the months ahead. Perhaps this time, the dawn is not false, and that gold’s inflation-hedging mojo is returning.

That massive call aside, gold’s bear-term support is USD1724.00 an ounce, followed by USD1700.00 an ounce. Resistance is at today’s USD1755.00 high, followed by USD1760.00 and USD1780.00 an ounce.

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