Oil and gold drifting

Oil prices give back Monday gains

Interestingly, despite the extreme intra-day volatility in oil markets, on a closing basis, Brent crude has hardly moved over the past five sessions, closing between USD 97.00 and 98.00 a barrel. Oil spiking early in the day on Ukraine-related developments but failing to maintain momentum and giving back those gains in New York. Exactly the same thing happened overnight, Brent crude touching USD 105.00 a barrel intraday, before retreating to finish 0.40% lower at USD 98.00 a barrel. By contrast, WTI held onto its gains, finishing 4.0% higher at USD 95.85 a barrel.

Part of the reason for Brent’s relative underperformance is that the SWIFT measures by Europe appear to leave the door open for energy payments to Russian entities. We are still somewhat in the dark on the exact Russian banks and the scope of the blockage from SWIFT. Secondly, officials have said that a new Iran nuclear agreement is 98% done. Hopes that an agreement is close may also be capping gains. We should not expect much from OPEC+ this week, as the grouping itself is already running at near full capacity to pump more oil. Additionally, the meeting between Ukrainian and Russian officials will be giving energy markets some hope that the worst is now priced in.

Nevertheless, oil prices have resumed their ascent in Asia as regional buyers, once again, seize on any material dips in prices to enter the market. Brent crude is 1.0% higher at USD 99.00 a barrel, and WTI has risen by 0.85% to USD 96.65 a barrel. Brent crude faces substantial headwinds at USD 106.00 a barrel, although support at USD 96.00 is unlikely to give way. WTI has support/resistance at USD 90.00 and USD 100.00 a barrel. Ukrainian developments still skew risks to the upside.

Gold fades once again

Once again, gold failed to hold onto its risk-aversion gains from yesterday morning, fading in New York as sentiment swung once again, and finishing the day just 1.05% higher at USD 1909.50 an ounce. In Asia, investors have continued to lighten haven positioning as equities have rallied, gold falling 0.20% to USD 1905.50 an ounce.

Gold’s inability to hold rallies above USD 1920.00 an ounce is a bearish development, even more so given that US yields fell across the curve overnight. We will need a substantial deterioration in the Eastern European situation from here, to spark a rally through USD 2000.00 an ounce.

Gold has resistance at USD 1930.00 which I believe is unlikely to break this week. That is followed by USD 1975.00 an ounce. Support lies at USD 1880.00 an ounce with a failure likely to trigger a larger culling of long positions, sending it back to USD 1820.00 an ounce.

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