Oil edges lower, gold claws upwards

Oil markets retreat from the highs

Brent crude and WTI both rose initially overnight, touching USD72.00 and USD70.00 a barrel, respectively. However, they could not sustain the momentum ultimately and finished the session lower. The price action suggests that either some option strikes or stop losses were taken out before reversing.

Brent crude and WTI finished 0.20% lower at USD71.45 and USD69.25 a barrel. Both contracts remain under pressure in Asia, falling another 0.80% to USD70.90 and USD68.70 a barrel, respectively. The price action has all the hallmarks of a very long speculative market getting nervous at the highs and is not indicative of an overall change in sentiment for energy.

With some improvement in the pandemic situation in India and the recovery in the US, China and Europe remaining on track, oil should remain a buy on dips, with no warning signs coming from the technical momentum indicators. Only a fall through USD70.00 a barrel by Brent crude, or USD68.00 from WTI, would signal a deeper downside correct.

Gold grinds higher

Despite US yields edging slightly higher overnight, the dip-buyers in gold were out in force, and gold finished the session 0.40% higher at USD1899.00 an ounce. Gold may have also picked up some bitcoin selloff-related tailwinds. Gold is almost unchanged in Asia, trading at USD1898.00 an ounce.

Given the volatility of last week, and the move by the technicals back into neutral territory, I remain of the opinion that gold will struggle to maintain gains above USD1900.00 an ounce until the US inflation data is out of the way on Thursday. CPI is expected at 0.4% m/m, compared to the previous reading of 0.8%.

Thus, I expect gold to jump around in a choppy USD1860.00 to USD1900.00 range this week, with last week’s high at USD1917.00 an ounce unlikely to be retested this week.

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