Oil climbs, gold trades sideways

The speculative frenzy continues for oil

Oil has powered higher in Asia this morning, following another session of outsized gains in New York on Friday. The global recovery fever saw Brent crude leap by 2.96% to USD62.65 a barrel on Friday, with WTI rallying 3.0% to USD59.95 a barrel.

WTI has broken through the USD60.00 a barrel mark this morning, which appears to have triggered another wave of buying on both WTI and Brent crude. WTI has risen 2.0% to USD60.80 a barrel, and Brent crude has risen 1.45% to USD63.55 a barrel.

Both Brent crude and WTI’s relative strength indices (RSI’s) remain in extreme overbought territory. Without sounding like a broken record, short of a one-week consolidation at these levels, oil remains vulnerable to a potentially aggressive pullback to wash out speculative longs. The speculative mania in oil markets can be partly attributed to the freezing weather sweeping the United States, but the warning signs of a downward correction are now flashing red.

Brent crude’s next technical target is now the USD66.00 a barrel region with no meaningful support until USD60.00 and USD57.50 a barrel. WTI now targets the USD65.60 a barrel, with any significant support distant at USD57.50 and USD54.00 a barrel.

Gold remains forgotten

Gold finished unchanged at USD1824.00 an ounce on Friday and has remained at the same levels in moribund trading in Asia. Any benefit from the general risk-on environment was balanced out by the rise in US yields on Friday.

Gold’s overall technical position remains fragile, and it will come under renewed downward pressure again this week, if US yields continue moving higher.

Gold’s rally failed at the 200-day moving average (DMA) previously, today at USD1856.00 an ounce. The yellow metal needs to recapture and hold this level for gold bulls to start breathing again.

Gold’s intraday pivot is USD1830.00 an ounce, with failure signalling another test of USD1800.00 an ounce is on the cards. Above the 200-DMA, gold’s next resistance is the 100-DMA at USD1869.00 an ounce.

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