Oil slips, gold shows volatility

Speculative long-oil positions get culled

Brent crude and WTI endured a torrid session overnight, with both falling by over 5.0% intra-day at one stage as panicked investors headed for the Covid-recovery exit door. Although both contracts recouped some of their losses, both ended the day well and truly in the red. Brent crude fell 2.85% to USD50.80 a barrel, and WTI fell 2.45% to USD47.85 a barrel.

A general mood of caution in Asian markets has seen both contracts retreat once again. Brent crude is 1.05% lower at USD50.53 a barrel and WTI is 1.20% lower at USD47.30 a barrel. Quite a lot of speculative long positioning would have been culled overnight. Still, given the scale of oil’s two-month rally, a deeper correction cannot be ruled out as the environment remains decidedly risk-averse.

Brent crude’s overnight low at USD49.25 a barrel forms initial support, followed by USD48.00 and USD47.00 a barrel. Only a failure of USD47.00 a barrel signals that the oil rally since November has run its course for now. Similarly, WTI’s overnight low at USD46.30 a barrel is an initial support. That is followed by USD45.00 and USD44.00 a barrel. Again, the longer-term uptrend remains intact, as long as USD44.00 a barrel holds.

Gold weathers equity sell-off

Gold traded in a USD62.00 an ounce range overnight between USD1855.00 and USD1907.00 an ounce. Gold wilted in the face of the initial equity sell-off in Europe, but New York markets’ recovery allowed gold to finish only 0.25% lower at USD1876.00 an ounce. Today in Asia, gold and silver are being buffeted by risk reduction, and stronger US dollar flows, resulting in both metals being unchanged from their New York closes.

Both gold and silver will likely continue to trade in noisy ranges as investors tweak portfolios ahead of the holiday break. Gold held resistance at its 100-DMA, today at USD1903.00 an ounce, almost perfectly overnight. Support lies at its USD1855.00 an ounce overnight low. Failure likely sees gold’s losses extend to USD1820.00 an ounce.

In all likelihood, the USD1855.00 to USD1900.00 an ounce range will contain gold today, albeit noisily. Silver is trading at USD26.0000 an ounce this morning, and only a move lower through its 100-DMA at USD25.1600 and the overnight low at USD24.9600 an ounce, will signal a deeper correction.

The gold/silver ratio finished the day 1.65% lower at 71.60 overnight. Longer-term support lies not too far distant at 68.85, and a move lower through that level will be a strong bullish signal for both precious metals.

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