Oil consolidates, gold moves sideways

Oil consolidates but remains dangerously overbought

Oil traded in a narrow range overnight, with Brent crude and WTI finishing almost unchanged at USD61.15 and USD58.40 a barrel respectively. Official US crude inventories dropped precipitously by 6.644 million barrels overnight, but that was offset by an equally large rise in gasoline stockpiles by 4.259 million barrels.

Last week, oil rose on much the same set-up in the inventory numbers as the street concentrated on the headline crude inventory reading, ignoring the gasoline stockpile. The fact that an identical set-up had no upward effect on oil prices overnight is yet another warning about the extremely overbought nature of the short-term market.

Both Brent crude and WTI’s relative strength indices (RSI’s) remain in extreme overbought territory. Without sounding like a broken record, short of a one-week consolidation at these levels, oil remains vulnerable to a potentially aggressive pullback to wash out speculative longs.

Brent crude’s next technical target is now the USD66.00 a barrel region with no meaningful support until USD57.50 a barrel. WTI targets the USD60.00 a barrel mark, with any significant support now distant at USD54.00 a barrel.

Gold stuck in neutral

With markets becalmed elsewhere, gold managed only a modest gain overnight as US yields ticked lower. Gold rose 0.25% to USD1843.50 an ounce. It has given all of that back on thin volumes in Asia, falling 0.40% to USD1836.00 an ounce.

Gold’s rally failed at the 200-day moving average (DMA) previously, today at USD1855.00 an ounce. The yellow metal needs to recapture and hold this level for gold bulls to start breathing again. Otherwise, its risks remain skewed to the downside with the rally this week looking like a dead cat bounce.

Gold’s intraday pivot is USD1830.00 an ounce, with failure signalling another test of USD1800.00 an ounce is on the cards. Above the 200-DMA, gold’s next resistance is the 100-DMA at USD1870.00 an ounce.

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