OPEC sticks to its targets, gold rallies

OPEC+ declines to hike oil production

OPEC+ refused to bow to international pressure, leaving monthly production increases on an unchanged path. The grouping is blaming movements in the natural gas market for oil’s rise. Below the surface, the resumption of US/Iran nuclear talks would have meant zero chance of increased production, with even a remote possibility that the full weight of the Iranian output could return to international markets.

Brent crude and WTI had very volatile nights, trading in an almost three dollar range, before closing virtually unchanged in New York as the dust settled. A lack of movement from OPEC+ being cancelled out by a much stronger US dollar. In Asia, some physical dip-buyers have pushed Brent crude 0.40% higher to USD 81.25, while WTI has risen by 0.30% to USD 79.60 a barrel.

Notably, both contracts have now staged downside breakouts through two-month trendline support, and although both tested those breakouts overnight, their rallies petered out a negative technical signal. Potentially, oil’s correction lower, helped along by lower coal and natural gas prices, could still have some way to go. The absence of heavy Asian buying today on this dip suggests they feel the same.

Brent crude’s resistance is distant at USD 84.50 and USD 85.00 a barrel, with support at USD 80.00 a barrel. Failure is likely to another wave of speculative longs exiting. WTI has resistance at USD 83.50, while support is at USD 78.00 a barrel. Threats by President Biden to use “tools”, including SPR releases, will have only a temporary impact on prices. Oil’s fundamentals remain solid, and with the northern hemisphere winter approaching, this dip in prices is likely to be volatile but still transitory.

Gold’s rallies, but beware the false dawn

Gold had another volatile session overnight, rising by 1.25% to USD 1791.50 an ounce. The rally was especially surprising given that the US dollar resolutely rallied overnight. I can only surmise that the dovish Bank of England policy meeting and a wave of lower for longer buying in global bond markets supported gold as US real interest rates turned more negative.

Once again, the robust US dollar rally is a warning sign that both the global bond rally, and by default, gold’s rally may be luring investors into a false calm. Only an extremely weak US Non-Farm Payrolls print tomorrow night will give gold a chance to recapture USD 1800.00 an ounce.

Gold fell through its one-month trendline support on Friday, which is today at USD 1800.00 an ounce. That is followed by resistance around USD 1810.00 and then USD 1835.00 an ounce. Resistance above USD 1810.00 has been challenging, and only a close today above USD 1815.00 an ounce will change my bearish outlook. Failure of USD 1760.00 and USD 1750.00 should see gold retest USD 1720.00 an ounce.

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