Nervous investors send gold higher, oil down

Profit-taking on oil sets in on US employment nerves

With oil’s upward momentum stalling after both contracts broke monthly resistance this week, it wouldn’t have taken a lot for investors to decide to book profits and reduce risk nervously. The US Initial Jobless Claims duly provided the excuse as both Brent crude and WTI retreated from their week’s highs.

Brent crude fell 2.20% to USD43.45 a barrel, and WTI fell 2.10% to USD41.05 a barrel. Buyers have emerged in Asia with both contracts creeping 10 cents higher in muted trade. The uptrend is intact as long as support at USD42.00 a barrel for Brent crude, and USD40.00 a barrel for WTI hold. A loss of these levels implies that a deeper correction will occur and that the breakout was false.

Both contracts remain vulnerable to negative sentiment from equity markets spilling over to energy. With a light data calendar, US/China headlines will drive intra-day price moves. My underlying bullish outlook remains intact though, viewing the overnight retreat as position trimming and not a turn in sentiment.

Gold powers higher

Gold rose again overnight, even as some long-awaited profit-taking in silver finally appeared. Gold rose to USD1898.00 an ounce in intra-day trading, before fading. It still managed to record an impressive 0.85% gain, closing at USD1887.50 an ounce.

With the US/China noise reaching deafening levels, gold has rediscovered its safe-haven appeal ahead of the weekend. Lower US yields and a weaker US dollar are also supporting prices at these levels. A break of the overnight highs should set gold up for a rapid move to the all-time highs at USD1920.00 an ounce. We would expect some heavy two-way traffic ahead of that level, however, should it break, gold may finish the week scurrying higher.

Gold has support at USD1865.00 and USD1840.00 an ounce. Only a loss of the latter calls the bullish outlook into question now. Gold is unchanged in Asia but should resume its advance once Europe arrives.

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