Oil ticks higher, gold falls below 1800

Oil edges higher

Oil continued to push higher overnight, although the rally’s pace being slowed by a rising US dollar. Nevertheless, Brent crude rose 0.65% to USD59.00 a barrel, and WTI rose 0.95% to USD56.45 a barrel. Both contracts have continued moving higher this morning, adding 20 cents a barrel each.

With inflation sentiment rising in the US, partially due to higher government borrowing, adding a tailwind to the economic recovery, the conditions still remain supportive for oil markets. Brent crude’s next target is the USD60.00 a barrel mark, and the technical picture suggests it is WTI’s target as well.

However, the Relative Strength Averages (RSI) on both contracts have now moved into overbought territory. A higher than expected Non-Farm Payrolls, and ensuing moves higher by US yields and the dollar this evening could set the market up for a short-term correction lower. Oil should find plenty of willing buyers on any material dip though. Brent crude has support at USD58.00 and USD56.00 a barrel. WTI has support at USD55.00 and USD54.00 a barrel.

Gold pummelled overnight

As I wrote above, gold suffered an ignominious end overnight as rising US yields saw it fall by 2.20% to USD1793.00 an ounce. Some profit-taking and weekend risk hedging has emerged in Asia, but gold has only risen by two dollars to USD1795.00 an ounce and looks very much like a dead cat bounce.

The risks are skewed towards more downside pain for a structurally long gold market as the weekend approaches. If US payrolls data outperforms, gold will almost certainly test long-term support at the 50.0% Fibonacci level at USD1760.00 an ounce. Failure signals a much deeper correction will occur over the coming week(s).

Gold has interim support at the overnight low at USD1785.00 an ounce, followed by USD1760.00 an ounce. Resistance is at the USD1803.00 an ounce breakout followed by the USD1830.00 an ounce area. A market print of 50,000 jobs or less tonight is probably gold’s best hope of redemption.

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