Oil leaps higher, gold steady ahead of NFP

Oil rallies post-OPEC+

With OPEC+ done and dusted, and the US dollar remaining soft, oil markets rallied strongly overnight. As the dust settles, though, both Brent and WTI have remained roughly in my preferred, if noisy, trading ranges for the week as traders scramble to find the most nebulous of news stories to explain intra-day price moves.

Brent crude rose by 2.15% to USD 73.80 overnight, with WTI leaping 2.20% to USD 69.75 a barrel. In Asia, both contracts have crept higher to USD 73.00 and USD 69.80 a barrel, respectively. Notably, Brent crude’s 100-DMA today at USD 71.10 a barrel, held every sell-off this week, and prices remain constructive as long as that continues. WTI has had a much choppier range, complicated by Hurricane Ida considerations, but seems to have found plenty of support on those short forays to USD 67.00 this week.

We can ponder the global supply/demand balance and its implications for oil prices next week. In the meantime, we have a US Non-Farm Payrolls release and a US holiday on Monday to negotiate first. Consequently, I anticipate Brent crude continuing to trade in a USD 72.00 to USD 74.00 a barrel range ahead of the data, while WTI should chase its tail noisily between USD 69.00 and USD 71.00 a barrel.

Gold on hold

Gold has another Sleepless in Seattle session overnight, closing almost unchanged once again at USD 1812.50 an ounce. Gold bulls should probably be a little concerned though. US yields have edged lower this week, and the US dollar has fallen quite a lot, yet gold prices have not been able to rally. That reinforces my fears that the V-shaped recovery momentum in gold prices has stalled.

Although gold remains confined to the tender embrace of its 100 and 200-day moving averages at USD 1814.80 and USD 1809.35 an ounce, respectively, gold is now set up for a solid directional move into the end of the week. Given its inability to continue rallying, the risks are skewed to the downside. If the US Non-Farm Payroll data exceeds expectations, gold could suffer an ugly sell-off tonight.

At this stage, resistance at USD 1820.00 and particularly, the USD 1830.00 to USD 1835.00 an ounce zone look more than capable of capping rallies. A fall through USD 1800.00 an ounce will see gold retest support at USD 1780.00 an ounce. If things get ugly, gold could fall as far as USD 1750.00 an ounce as stale long positioning heads to the abattoir.

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