Oil upswing continues, gold

Oil coattails natural gas higher

An unchanged OPEC+ continued to reverberate through oil markets overnight, lifting prices, as did the near 10% overnight rally in natural gas prices. Brent crude finished 1.55% higher at USD 82.55, and WTI rallied 1.85% to USD 70.05 a barrel. Both remain around those levels in Asia as local markets digest another overnight jump in prices.

The overnight US API Crude Inventory data showed only a modest increase in crude in storage. The official Crude Inventory data tonight will assume greater importance. A tiny fall of 400,000 barrels is expected, but if crude stocks drop substantially, oil is likely to have another excuse to rally aggressively once again.

Brent crude will find plenty of support on dips to USD 79.00 and USD 76.00 a barrel. After rising through USD 82.00 overnight, it has no meaningful resistance ahead of the 2018 highs around USD 87.00 a barrel in its sights. WTI will be well supported on dips to USD 76.00 and USD 75.00 a barrel. Having cleared USD 78.50 overnight, the charts suggest that a rally to USD 84.00 a barrel is not out of the question.

The only caveat on further immediate rallies is that the relative strength indexes (RSIs) on both contracts are now in very overbought territory. That may signal some daily pullbacks this week but does not change the underlying bullish case for oil. Any sudden dips in prices to cull speculative longs are likely to be met with just as quick price rebounds.

Business as usual for gold

The old inverse correlation between gold and the US dollar returned overnight. As firmer US yields and a resumption of the US dollar uptrend pushed gold 0.55% lower to USD 1760.00 an ounce. In Asia, with the US dollar continuing to rise, gold has fallen by 0.30% to USD 1755.00 an ounce.

It looks as though some risk-hedging is still around, however, and I continue to expect gold to find some support at USD 1750.00 and USD 1740.00 an ounce with resistance at USD 1785.00 capping gains into Friday’s US data. More important support lies at USD 1720.00 an ounce, with the USD 1800.00 to USD 1810.00 an ounce zone, containing the 100 and 200-day moving averages, forming a formidable zone of resistance.

A firm US Non-Farm Payroll number on Friday will put the Fed taper back in play with no ambiguity. That will see the gold downtrend resume with renewed momentum.

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