Oil edges up, gold vulnerable

Oil moves to the top of its range

Oil prices edged higher overnight, Brent crude rising 1.25% to USD 78.90, and WTI climbing 0.85% to USD 75.95 a barrel. Diminishing omicron concerns have supported oil through the holiday period and the spectre of OPEC+ now looms over energy markets. The OPEC+ monthly meeting has rolled around quickly this time, probably because they left the last one open in December as omicron hit, to support prices. The JMMC and full grouping meet this week with the OPEC+ still-open meeting oil floor having done its job without costing a cent. I do not expect any changes or surprises from OPEC+ this week, but its mere threat should keep a floor under prices this week.

Oil has risen again in Asia, helped along by Indonesia banning coal exports over the weekend, having exported so much this year that their own stocks in Java for power generation are now dangerously low. The ban will impact China the most initially, but given their inventory building, should not cause too much of a stir. In the meantime, it has been enough to life oil prices in Asia by around 0.50% to USD 79.35 for Brent, and USD 76.35 a barrel on WTI.

Brent crude has support at USD 77.60 and USD 77.50 barrel, its 100-day moving average (DMA), followed by USD 77.30. It has resistance at USD 80.00, and USD 82.00 a barrel. WTI has support at USD 75.00 and then USD 74.60, its 100-DMA. It has resistance at USD 77.50 a barrel, and then USD 79.30.

Gold’s Christmas rally ends abruptly

Gold showed, once again, how frail bullish sentiment is as recent long positions were stopped out overnight, gold falling 1.50%, or USD 28.50 an ounce, intraday to close at USD 1801.50 an ounce. Some short-covering has seen it creep up to USD 1804.00 an ounce in Asia.

Gold’s attempts to stage a meaningful recovery remain unconvincing, with traders cutting long positions at the very first sign of trouble intra-day. This time it was the US bond market, with yields rising sharply and sending gold into an equally vicious tail-spin, unwinding its entire Christmas rally. This is not the first time we have seen this sort of price action in the last month, with gold’s most consistent pricing factor being its ability to disappoint bullish investors.

Gold has resistance at USD 1830.00 and USD 1840.00 an ounce, although it would be a huge surprise if we saw those levels this week. Support lies at USD 1790.00, followed by USD 1780.00 an ounce. USD 1790.00 to USD 1820.00 is my call for the range this week.

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