Oil in choppy waters, gold range trades

Headless chickens rule oil markets

Brent crude and WTI finished on moderately lower overnight, but that belied the aggressive intraday price action with both contracts falling over USD 3.00 a barrel intraday. The intraday capitulation reversed leaving Brent crude 1.20% lower at USD 72.10, and WTI 1.60% lower at USD 69.20 a barrel. In Asia, the slight rebound in sentiment has seen both contracts add 10 cents a barrel.

Although the short-term outlook for oil is being sunk by negative virus and US legislative sentiment, we should not discount OPEC+ from the equation. OPEC+ left their last meeting open precisely to manage this type of situation. If Brent crude continues to head south from here, I wouldn’t discount OPEC+ stepping in to roll back their recent production increases. Given that compliance is over 100%, this would process would be easy to achieve right now.

Brent crude has resistance at USD 72.50 and then the 200-DMA at USD 73.20 a barrel. Support is at USD 69.00 a barrel. WTI has resistance at USD 69.40 and then the 200-DMA at USD 70.50 a barrel. Support lies at USD 66.00 a barrel.

Gold range trade continues

Gold edged lower overnight as momentum once again faded, leaving the yellow metal 0.40% lower at USD 1790.50 an ounce. In Asia, the recovery in sentiment has lifted it 0.10% higher to USD 1792.30 an ounce.

Gold’s attempts to stage a meaningful recovery continue to disappoint, with traders cutting long positions at the very first sign of trouble intra-day. Gold lacks the momentum, one way or another, to sustain a directional move up or down. Likely, gold will remain a forgotten asset class and face another week of choppy range trading.

Gold has formed a rough double top around the USD 1815.00 region which will present a formidable barrier at USD 1840.00.  Support lies at USD 1790.00, followed by USD 1780.00 an ounce. USD 1790.00 to USD 1815.00 could well be the range for the week.

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