Oil rises on OPEC, gold surges

Oil lifted on OPEC projections

Oil markets rose overnight and this morning after the US dollar weakened and OPEC lifted its consumption projections higher for the rest of 2021. Brent crude rallied 1.30% to USD63.90 a barrel overnight, rising to USD64.10 this morning. WTI jumped by 1.40% to USD60.45 a barrel overnight, rising to USD60.65 today.

Despite the noise, both contracts remain solidly in range-trading mode, with Brent crude trapped in a broad USD60.00 to USD65.50 a barrel range and WTI between USD57.50 and USD62.50 a barrel. I note, however, that Brent crude has traced out a series of higher daily lows over the past week. That suggests that oil is quietly gathering momentum for a retest of the upside boundaries of its recent ranges. Given the bullish mania sweeping other asset classes, that is really of no surprise.

Gold surges higher overnight

Gold’s mechanical linkage to the US 10-year Treasury yield remains as strong as ever. With yields retreating overnight after markets ignored the US inflation data, gold rose by 0.70% to USD1745.50 an ounce. As has been its want of late in Asia, gold is almost unchanged at USD1744.00 an ounce, with Asian investors’ attention more focused on the crypto-verse.

Importantly, the overnight US 30-year bond auction passed without incident with a healthy bid-to-cover ratio. With 3-year, 10-year and 30-year auctions all successfully concluding this week, the flame of a steeper yield curve has lessened markedly.

Gold’s most important resistance remains tantalisingly close at USD1760.00 an ounce, its 50.0% Fibonacci retracement. Gold needs a series of daily closes above that level to confidently say that it has traced out a longer-term bottom in prices between the 50.0% Fibonacci and the 61.80% Fibonacci around USD1680.00 an ounce.

Gold has support at USD1720.00 an ounce, with interim resistance at USD1750.00 an ounce. As I stated yesterday, gold seems destined to range between these two levels, and that outlook has not changed.

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