Gold, silver settle after strong volatility

Oil’s compressed range trading continues

Oil prices hardly budged again overnight, with the compressed range trading of the past month still very much ascendant. Brent crude eased by 0.45% to USD43.40 a barrel, and WTI slipped 1.30% to USD41.10 a barrel. Oil remains on investors radars as the fireworks fly in other markets. Oil is being capped over persistent concerns about Covid-19’s effect on the US and global growth, while being supported by a generally weaker US dollar.

Tonight’s EIA US Crude Inventories could provide the spark for a move lower though, should crude inventories or gasoline inventories spike higher. After a month isolated in a relatively tight range by oil’s standards, that may be enough for stale long positioning out there to throw in the towel.

Key support regions remain USD41.50 a barrel on Brent crude and USD40.00 a barrel on WTI. A daily close below one or either implies a deeper correction lower is in progress.

Precious metals stabilise after a torrid session overnight

Gold and silver has a hugely volatile overnight session, likely reflecting the amount of fast money that had entered both trades in the past week. Gold traded in a 75-dollar range between USD1906.00 and USD1981.00, before finally closing 0.85% higher at USD1958.00 an ounce. Trading was even more emotional in silver markets, with silver trading in a 15% range between USD22.3000 and USD26.3000 an ounce overnight. Silver finally finishing 0.70% lower at USD24.40, almost precisely mid-range for the session.

The breath-taking price action suggests that a lot of fast money spent the day getting seriously chopped-up on intra-day reversals. What is clear though that despite the volatility, both precious metals found plenty of willing buyers on the material dips, as evidenced by their almost unchanged finishes. The speculative herd has undoubtedly been aggressively culled now, along with more than a few freshly minted recent systematic and technical longs. That leaves the playing field much less crowded now, allowing the return of sensible fundamental thinking, as opposed to the get-rich-quick massive.

Those underlying fundamentals strongly suggest higher levels await on both metals. In silver’s case, it is still not yet oversold on a gold/silver ratio basis. Critical supports are the overnight lows at USD1906.00 and USD22.30 an ounce respectively with USD1900.00 for gold being a psychological level for the market. Gold’s fundamentals still shout that a test of USD2000.00 an ounce will occur soon, with silver likely to test USD30.00 an ounce. The critical thing to remember is that the road to those points is expected to be a windy once with cliff-edge sides, and not a polished and straight six-lane motorway.

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