Oil falls lower, gold choppy

Oil’s retreat continues

The repricing of the Covid-19 reality in the world continued unabated in oil markets overnight, with US API Crude Inventories showing a surprise climb, and adding to the gloom. Brent crude fell through USD50.00 a barrel, finishing 2.0% lower at USD49.80. WTI fell 2.25% to USD46.75 a barrel.

Both contracts are in retreat in Asia, in contrast to the positivity seen in equity and forex markets. Both contracts have fallen another 1.0% in Asian trading, leaving both Brent crude and WTI precariously perched on support levels for the week.

Brent crude is trading at USD49.30 a barrel, just above support at USD49.20 a barrel. Failure opens up further losses to USD48.00 a barrel and then critical support in the USD47.00 a barrel region. A failure of USD47.00 implies that oil’s two-month rally has run its course and a deeper correction is likely.

WTI is trading at USD46.25 a barrel, its lows for the week. A move through USD45.75 a barrel implies more profound losses to USD45.00 a barrel initially, ahead of critical support at USD44.00 a barrel. As with Brent crude, a loss of USD44.00 a barrel implies that WTI’s two-month rally has come to an end.

Gold’s choppy range-trading continues

Gold continues to trade noisily in a wide 80-dollar range, with risk aversion fears supporting price dips, and a stronger US dollar capping upside gains. Overnight, gold fell 0.88% to USD1860.00 an ounce, leaving it mid-range for the week. Today in Asia, it has partially reclaimed those losses, rising 0.25% to USD1865.00 an ounce.

Gold choppy range trading is set to continue as moves in other asset markets buffet it and as liquidity falls into the holiday period. From a technical perspective, gold is bookended by its 200 and 100-day moving averages at USD1820.00 and USD1901.00 an ounce respectively. Investors should probably content themselves to play the range until more clarity returns to markets. Gold will remain vulnerable to aggressive selloffs on US equity markets, should they occur. In the bigger picture, gold’s structural low at USD1760.00 an ounce remains intact.

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