Gold up on soft dollar, oil recovers

Oil markets recover

Oil rallied strongly overnight, with the corrective culling of speculative long positioning appearing to have run its course for now. With markets shrugging off the histrionics in Washington DC as noise over substance, cyclical stocks were in favour overnight, with markets focusing on a 2021 global recovery.

Official US Crude Inventories fell by 562,000 barrels, less than the -3.2 million-barrel fall forecast. Quite often with crude inventory data, the markets will happily fit the numbers to the narrative when it suits and ignoring it when it doesn’t. It was all music to the ears of energy markets though, with Brent crude rising 2.70% to USD51.15 a barrel, and WTI leaping 2.75% to USD48.05 a barrel.

The rally has continued in Asia with the region firmly in global recovery mode. Brent has risen 0.45% to USD51.50 a barrel, and WTI has risen 0.40% to USD48.25 a barrel. Brent crude’s next resistance is USD52.50 a barrel, while support is a clear triple bottom at USD49.25 a barrel. WTI has resistance at its USD49.30 a barrel double top, and support appears at USD46.10 a barrel.

With liquidity falling into the holiday period, I expect oil to trade in some quite broad, and potentially volatile ranges in the days ahead. Oil’s ability to move through resistance depends entirely on developments in Washington DC, which are looking very messy at the moment. That still leaves the door open equally, for a sharp fall or rally from here, despite the underlying bullish case for higher prices in 2021.

Gold rises on a weaker dollar

A weaker US dollar overnight, and the return of global recovery risk appetite, saw gold rise 0.70% to USD1873.70 an ounce. Gold in Asia today has crept 0.15% higher to USD1876.20, with silver increasing 0.95% to USD25.7900 an ounce. Liquidity pre-holidays though is thin.

The overnight rally leaves gold parked in the middle of its one-week range, lacking the drivers and momentum to attempt a directional move either way. That will rely on Washington DC’s confusing situation regarding funding and stimulus bills to resolve over the next week.

In the meantime, gold looks set to range between USD1850.00 and USD1900.00 an ounce. Critical levels to watch are the 100-day moving average, (DMA), today at USD1899.50 an ounce, and the 200-DMA, which offers support at USD1822.00 an ounce. Only a daily close above or below those moving averages will suggest that gold’s range-trading is over and that a directional move is imminent.

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