Oil steady, gold dips on higher US yields

Oil markets unchanged in Asia

Oil markets edged lower in New York on Friday, as the US dollar strengthened modestly. Overall, the trading was directionless as both Brent crude and WTI continue consolidating in the middle of their one-month ranges, awaiting new directional inputs. It is a similar story in Asia, with Brent crude unchanged at USD63.00 a barrel, and WTI unchanged at USD59.30 a barrel.

In the bigger picture, Brent crude continues to trade noisily between USD60.00 and USD65.00 a barrel, and WTI’s between USD57.50 and USD62.50 a barrel. Intraday sentiment and flows continue to dominate proceedings. A breakout of those wider ranges will signal oil’s next directional move.

Gold retreats on higher US yields

Gold’s correlation to the US 10-year bond continues, with higher yields on Friday pushing gold lower by 0.67% to USD1744.00 an ounce. Gold has edged another 0.30% lower to USD1738.50 an ounce in quiet Asian trading.

Gold tested and failed at the 50.0% Fibonacci retracement level at USD1760.00 an ounce on Friday, for the second day in a row. That suggests that US yields will have to move markedly lower this week, or gold rediscovers its haven mojo, for that level to break, opening up further gains.

Federal Reserve Chairman Jerome Powell has injected some nervousness into the market, stating the US economy is at an “inflection point” during a television interview. The US recovery is balanced out by the downside risks of surging Covid-19 cases globally.

Another likely source of tension is US bond yields which rose on Friday after US PPI data printed much higher than expected. If this upward trend continues, gold could be under pressure. The US has three, ten and thirty-year bond auctions this week, and bid-to-cover nerves have risen. The response to these auctions could have a significant impact on the direction of bond prices this week as well as gold.

For now, gold looks set to trade quietly in a USD1730.00 to USD1760.00 range, with bitcoin seemingly the safe-haven asset of choice at the moment. In the meantime, gold remains at the mercy of the US 10-year Treasury yield.

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