Oil goes for a ride, gold clueless

Oil’s price action gets emotional

If you’re looking for volatility, trade oil markets. Oil’s price action overnight bordered on outright lunacy as Brent crude rose from USD 114.50 to USD 119.70, before falling to finish 3.60% lower at USD 110.40 a barrel. WTI had a similar day, an aggressive rally and capitulation to finish 3.0% lower at USD 108.00 a barrel. Oil rallied on Ukraine and supply concerns yesterday until news hit the wires of an apparently imminent Iranian nuclear deal, whereupon the herd turned south in a cloud of dust.

Oil prices shot higher in Asia as physical buyers jumped on the dip and the Zaporizhzhia reactor headlines hit the wires, both contracts climbing over 3.0% initially. With nerves slightly less frayed a few hours later, both contracts remain elevated. Brent crude and WTI are 2.0% higher at USD 112.50 and USD 110.00 a barrel respectively.

On a technical basis, both contracts’ relative strength indexes (RSIs) remain grossly overbought, meaning more relief sell-offs are entirely possible. That will probably require a formal Iran deal announcement now. I see it as entirely possible that both Brent crude and WTI trade between USD 105.00 and USD 120.00 a barrel ahead of the New York close; it’s that sort of market.

Gold remains a possum in the headlights

Gold continues to trade like a possum in the headlights, unable to decide whether it is a wartime haven asset, or grossly overbought and about to correct. The net result is it remains running on the spot, albeit not far from recent highs. Gold rose 0.40% to USD 1936.00 overnight, adding another 0.15% to USD 1939.50 in Asian trading.

Gold remains overbought on a technical basis, and is still vulnerable, therefore, to long positions losing their nerves and sparking an aggressive corrective sell-off, with the rally now stalled like a Russian logistics chain. Gold looks set to continue trading in a USD 1920.00 to USD 1950.00 an ounce range, with major support/resistance at USD 1880.00 and USD 1975.00 an ounce respectively.

Silver’s price action remains constructive ad appears to be forming a bullish pennant formation. Key levels are USD 24.8500 and USD 25.6000.

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