Gold and silver rally, oil consolidates

Oil consolidates gains

Oil shrugged off a surprise rise in US crude and distillate inventories overnight to consolidate gains above key recent resistance levels. Although both contracts edged only moderately higher in overnight trading, the fact that oil could weather the US crude inventory surprise is a positive indicator.

Brent crude and WTI both rose and finished 0.20% higher, at USD44.25 and USD42.05 a barrel respectively. More importantly, Brent crude finished above previous resistance at USD44.00 a barrel and WTI above USD42.00 a barrel.

Trading is subdued in Asia with both contracts edging another 20 cents higher this morning. Geopolitical concerns have been set aside with energy markets sensing that a new US/China trade war, derailing the global recovery, is an unlikely outcome.

Unless China surprises, we expect the rally to restart in European hours. Brent crude’s medium-term target remains USD48.00 a barrel, and WTI’s at USD44.00 a barrel, their respective 200-DMA’s.

Gold and silver close at their session highs

The rally in gold and silver continued with full force overnight. Gold closed near its highs, finishing 1.65% higher at USD1872.00 an ounce. Silver finished the session 8.10% higher, closing at USD23.0000 an ounce. Precious metals were boosted by a weaker US dollar, lower US yields and systematic and safe-haven flows.

Silver has seen some profit-taking on thin volumes this morning, falling 1.55% to 22.6775 an ounce. Its high overnight forms initial resistance, with only a loss of USD21.0000 an ounce calling the rally into doubt.

Gold is unchanged with support at USD1840.00 an ounce, somewhat distant after the volatility of overnight trading. Resistance is at the overnight high of USD1877.00 an ounce. After that, the all-time high at USD1920.00 an ounce is the next target. A break of USD1920.00 will almost certainly spur renewed systematic, and options and stop-loss related buying. That said, we would almost certainly expect barrier option-related selling initially ahead of USD1920.00.

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