Oil prices rise, gold under pressure

Oil’s rally powers on

Positive US data and a fall in EIA crude inventories were enough to maintain oil’s upward momentum overnight. OPEC+’s JTC produced no surprises, and the EIA said total crude inventory stocks have fallen to a 10-month low. Brent crude powered 1.50% higher to USD58.10 a barrel, and WTI rallied 1.60% toUSD55.95 a barrel.

Asian markets have added another 0.25% to both contracts this morning as global recovery hopes take a front seat once again, and gold weather persists in Northern Asiana in the United States.

Brent crude’s next technical target is USD60.00 a barrel, with previous resistance levels at USD57.40 and USD56.60 providing support. WTI’s technical picture also targets the USD60.00 a barrel region, with previous resistance levels at USD54.45 and USD54.00 a barrel its crucial pivot level.

Gold’s soggy price action continues

Although silver eked out a minuscule 0.75% gain overnight, gold’s lethargic price action continued. Gold fell 0.22% to USD1834.00 a barrel overnight. It has eased another 0.55% to USD1824.00 an ounce in Asia as silver falls by over 1.0%.

The momentum in silver has vanished as quickly as it began as the Reddit army learned a harsh lesson attempting to squeeze liquid assets. The rear-guard talk that silver represented an undervalued asset is complete nonsense. Silver is undervalued only in that it is cheaper per ounce than gold. A look at the gold/silver ratio, today at 68.50, shows it is not far from its multi-year average, even stripping out the March 2020 spike. Additionally, I do not doubt that producers were falling over themselves to hedge future production into the Reddit-driven spike, yet another harsh lesson in demand and supply.

Notably, gold continues to fall faster when silver drops than when silver rises. US yields rose overnight, dealing another blow to gold longs, and if they continue to move higher into tomorrow’s US data, gold will suffer.

Although gold has fallen through support at USD1830.00 an ounce this morning, no doubt triggering some stop-losses, I still expect it to trade in a USD1800.00 to USD1850.00 an ounce range for the rest of the week. The Reddit carnage in silver will also continue, capping gains. The cyclical low and 61.80% Fibonacci at USD1760.00 remains gold’s must hold zone.

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