Oil punches past 60, gold rises

Oil breaks USD 60 a barrel

Oil’s upward momentum remained undiminished on global recovery hopes. Investors looking for a quick buck piled into oil sending Brent crude 1.88% through USD60.00 a barrel, to finish at USD60.70 barrel. The rally has continued in Asia, with Brent crude adding another 0.48%, rising to USD60.95 a barrel. WTI enjoyed a stellar session as well, increasing 2.0% to USD56.95 a barrel, before adding another 0.45% to USD58.30 a barrel in Asia this morning.

Brent crude’s next technical target is now the USD66.00 a barrel region with now meaningful support until USD57.50 a barrel. WTI now targets the USD60.00 a barrel mark, with meaningful support now far distant at USD54.00 a barrel.

That Brent crude and WTI have now run so far ahead of their respective support region in such a short amount of time is a warning sign. The Relative Strength Indexes (RSI’s) on both have now climbed into very overbought territory. When it comes, the correction could well be quite brutal unless oil now contents itself to consolidate at these price levels for the next few days. Investors that are long up here should prepare to be nimble.

Gold rises on a weaker US dollar

Gold finally found some friends overnight, rallying powerfully by 0.90% to USD1831.00 an ounce, before advancing another 0.57% to USD1841.00 announced this morning in Asia. Gold though can thank a weaker US dollar for its salvation, not a change in the yellow metal’s structural outlook.

Having recaptured its previous support region around USD1830.00 an ounce, gold needs to hold this level, ideally mounting a challenge on its 200-day moving average at USD1853.80 an ounce. Beleaguered long positions can start to breathe easier once this occurs.

Gold is likely to be sought after on any dip for the next two sessions by Asian investors, looking to load up on risk hedging ahead of the Lunar New Year break. In the bigger picture, gold’s fate remains in the hands of events elsewhere in the US dollar and US bond market.

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