Oil moves up, gold under pressure

Oil prices rise once again

Oil prices rose once again overnight, albeit at a much more modest pace in line with the price action seen in equity markets. Unlike the equity rally, oils recovery is backed by sound supply and demand fundamentals in addition to diminishing omicron concerns. A potential Russia/Ukraine supply crunch is also supportive even if Europe heads back into deeper virus restrictions through the winter.

Brent crude rose by 1.15% to USD 76.00 overnight, achieving my end of week target early. It has gained another 0.30% to USD 76.20 a barrel in Asia. WTI leapt 1.30% higher to USD 72.60 a barrel, gaining another 0.25% to USD 72.90 in Asia, just short of my target for the week.

Both contracts have recovered above their respective 200-day moving averages (DMAs) at USD 73.00 and USD 70.30 respectively, which should provide support on pullbacks. The 100-DMAs at USD 77.00 and USD 74.00 form initial resistance, although a weaker US CPI tomorrow could see both contracts rise higher with ease. I continue to believe that the lows of last week will be the lows for possibly all of 2022.

Gold risks remain

Gold attempted to rise overnight as sentiment continued to attract previously burnt bullish investors back to precious metals. It failed to overcome the clustered 50,100 and 200 DMAs however and ended the session almost unchanged at USD 1782.80 an ounce. In Asia, it has risen an asthmatic 0.15% to USD 1785.75 an ounce in moribund trading.

Although I am not ruling out further gains as omicron fears recede and a 7.0% US CPI print is priced into markets, gold’s topside failure overnight is a warning that bullishness is very fragile and that selling will resume at the first sign of trouble. The downside continues to be very clearly, the path of least resistance.

In the bigger picture, gold still looks confined to a USD 1770.00 to USD 1800.00 range this week, unable to sustain momentum above or below those levels. The 50,100 and 200-day moving averages (DMAs), clustered between USD 1790.30 and USD 1795.50 are capping gains. USD 1800.00 and USD 1810.00 will prove equally formidable. Support lies at USD 1770.00 and USD 1760.00.

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