Oil dips on cautious markets, gold higher

Profit-taking hits oil prices

As US stimulus talks reached a temporary impasse, the more cautious tone in markets overnight was enough to spur profit-taking in an oil market that is very very long. Brent crude fell 0.90% to USD48.60 a barrel, and WTI fell 1.05% to USD45.65 a barrel. Both contracts have shed another 15 cents a barrel in muted Asian trading.

As I noted yesterday, the heaviness of long positioning, and the approaching overnight levels of their respective relative strength indexes (RSI), had made both contracts vulnerable to pullbacks. The price action overnight though, looks strictly corrective, and not a structural change in sentiment. Given the scale of oil’s rally since November’s lows, this makes complete sense.

Both Brent crude and WTI could well correct lower if the noise from Washington DC becomes more negative. But until Brent crude closes below support at USD47.00 a  barrel, and WTI below USD45.00 a barrel, both remain in technical uptrends. Initial resistance occurs at USD50.00 a barrel for Brent crude and USD47.00 a barrel for WTI.

As noted above, with equity markets, it is important not to look for conspiracies where none can explain the price action. Oil is in a period of consolidation and profit-taking, while the market awaits better visibility.

Gold’s recovery gathers steam

Gold prices raced higher overnight, with the US budget impasse spurring haven buying among precious metals, as investors lowered weightings in other asset classes. Gold finished the day higher by 1.30% at USD1862.50 an ounce as US yields edged lower. In Asia today, gold has advanced higher, rising 0.30% to USD1868.00 an ounce.

As stated yesterday, gold looks to have traced out a structural low at USD1760.00 an ounce last week. It has now moved through resistance between USD1850.00 and USD1860.00 an ounce. It is targetting the 50-day moving average at USD1875.00 an ounce, followed by the USD1900.00 an ounce region. Support lies at USD1850.00 an ounce followed by USD1825.00 an ounce.

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