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Oil falls, gold stays steady

Oil sinks further on growth concerns Both Brent crude and WTI endured a tough day at the office yesterday as global growth concerns and a strong post-minute’s…

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This article was originally published by Market Pulse

Oil sinks further on growth concerns

Both Brent crude and WTI endured a tough day at the office yesterday as global growth concerns and a strong post-minute’s US dollar saw both contracts post significant losses. The US official crude inventories fell by more than expected, as did distillates, but traders chose to focus on the unexpected rise in gasoline stocks. Oil markets usually tend to cherry-pick the data they want to fit their preferred narrative with official crude inventories. The fact that they focused on rising gasoline stocks underlines the growth/recovery fears and emphasises it as the prevailing sentiment in the market.

Brent crude fell by 2.35% to USD 67.45 a barrel, adding ten cents to USD 67.55 in the Asia session. WTI plummeted by 2.95% to USD 64.60 a barrel, where it remains in Asia. Brent crude managed to close on support at this level overnight, but the technical picture now signals that further losses to the triple bottom support at USD 64.50 a barrel could occur. Resistance is distant at USD 70.00, and the USD 70.35 a barrel, its 100-DMA.

WTI fell through important double bottom support at USD 65.10 a barrel overnight, which becomes short-term resistance. That is followed by USD 67.50 and USD 67.80 a barrel; its 100-DMA. WTI has no technical support of note until USD 61.50 and then the 200-DMA at USD 60.60 a barrel.

It is hard to see the negative sentiment surrounding growth fears, a tapering Federal Reserve and increasing production from OPEC+ miraculously turning about-face overnight. With that in mind, the downside remains the weaker side for oil prices which are in danger of seeing another capitulation sell-off.

Gold falls in Asia

Gold remained on the sidelines overnight thanks to a New York session where US yields and the US dollar barely move post-FOMC Minutes. Gold contented itself with trading in a narrow USD 1777.00 to USD 1793.00 range before closing almost unchanged at USD 1787.30 an ounce.

Things have changed in Asia as markets have seen a bout of US dollar strength sweep currency markets this morning. That has caused gold to fall by 0.50% to USD 1778.80 an ounce. Having traced out a series of lower daily highs this week, failing multiple times ahead of USD 1800.00 an ounce. Gold may be signalling that last week’s frenzied FOMO upward momentum is waning, especially as the US dollar strength seems to have some strong momentum now.

Gold has immediate resistance at USD 1787.00 and then USD 1800.00 an ounce. That is followed by a formidable region containing the 100-DMA at USD 1808.20 and the 200-DMA at USD 1812.70 and a series of daily highs, each side of USD 1834.00 an ounce. Gold has a lot of wood to chop to maintain its rally.

Failure USD 1770.00 is likely to spark a flurry of hot money sellers cutting long positions, pushing it lower to the next support at USD 1750.00 an ounce. If that fails, gold will be vulnerable to a deeper retracement targeting the USD 1700.00 an ounce area.

Economics

Between a rock and a hard place

What will the Fed do? European stocks are making decent gains on Thursday, while US futures look a little flat ahead of the open on Wall Street. US equities…

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What will the Fed do?

European stocks are making decent gains on Thursday, while US futures look a little flat ahead of the open on Wall Street.

US equities rallied as the session wore on yesterday and we’re seeing Europe playing a little catchup this morning. Overall, the mood remains a little downbeat in the markets, with investors torn between the “buy the dip” approach that has fared so well in the past and the growing list of economic and market risks that are increasingly evident.

We may see more of this over the coming months as countries get to grips with winter Covid surges, higher energy prices and higher inflation, among other things. Which makes the positions of central banks all the more uncomfortable, with many seemingly determined to persevere with paring back their pandemic stimulus measures.

Of course, if they are becoming more of the view that inflation is not as transitory as they previously believed, then they’re caught between a rock and a hard place and may be forced to act. But that will only pile on the pressure and disrupt the economic recoveries that many have enjoyed.

Next week we should learn a lot more about what the world’s most important central bank thinks of recent developments and how it perceives the risks posed by inflation. It may not be surprising therefore if equities err on the side of caution between now and then as an undesirable response could trigger a nasty reaction in the markets.

US data delivers gains for stocks, yields and USD as gold tumbles

Today’s data from the US has done little to clear things up, with both retail sales and the Philly Fed manufacturing index smashing expectations while jobless claims popped a little but only just exceeded forecasts. Retail sales have been volatile for a number of months but an August increase of 0.7% was the reverse of the decline that was expected.

Philly Fed has been trending lower since March and that trend was expected to continue but a surprise jump may be cause for optimism. While new orders and employment indicators softened, firms remain optimistic about the next 6 months as current general activity and shipments saw large increases.

US futures got a small lift on the back of the data while the dollar continued to rally as US yields drifted higher once more. Gold, which has been through a rough patch over the last 48 hours, didn’t fare well with the data and continued to trend lower on the day.

Bitcoin struggling at $48,000 once again

Bitcoin has steadied once more around $48,000 which remains an interesting technical level. A rotation off here back towards $44,000 could see correction pressure grow. I say this having talked about the prospect of a correction for weeks now and yet, bitcoin has shown remarkable resilience.

It obviously hasn’t burst higher in that time either but it’s certainly dragging its feet. With that in mind, there isn’t much to add at this point. A significant break below $44,000 could make things interesting, while a move above $48,000 will put the focus back on $50,000 and may even trigger a shift in momentum that has been absent in previous rallies.

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Precious Metals

Oil pares gains, gold plummets ahead of Fed

Oil sees profit taking at summer highs Oil is pulling back a little on Thursday after enjoying another strong rally in recent days. Hurricanes hitting…

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Oil sees profit taking at summer highs

Oil is pulling back a little on Thursday after enjoying another strong rally in recent days. Hurricanes hitting the Gulf Coast in recent weeks have disrupted production in the region which has given a boost to prices. And with two more months of Hurricane season remaining, more disruption could follow.

Inventory data from EIA gave prices another lift on Wednesday, with WTI and Brent also rallying ahead of the release after API also reported a large drawdown a day earlier. With prices now back around summer highs, we are seeing some profit taking kicking in but the rally continues to look well supported.

WTI fell a little short of its summer highs around $75, stumbling around $73, while Brent saw resistance around $76. A break through these levels could see the rally gather even more momentum. If we do see a small pullback, the first test of support could come around $70 in WTI, where it had previously seen resistance.

Tough times ahead for gold?

Gold has fallen out of favour and fast, with the yellow metal slipping more than 1.5% today and below a key support level. This comes only a couple of days after it broke back above $1,800 on the back of softer US inflation data but that celebration was short-lived and it’s suddenly looking rather vulnerable.

From a technical perspective, $1,780 marked the neckline of a head and shoulders that formed over the last month, peaking at $1,833. The next major test below could come around $1,750 but further downside could be on the cards.

The fact that this has come ahead of the Fed meeting doesn’t bode well for the yellow metal. Recent data has given the Fed room to be more patient with tapering but the commentary we had late last week from officials suggested many aren’t discouraged. Gold could feel the love once more should policymakers change course next Wednesday but it could be a long week for the yellow metal in the interim.

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Economics

OIl Firm But Gold Flashes Danger

Oil prices leap higher.   Oil prices staged an impressive rally overnight having spent the week ignoring the gloom sweeping other asset classes. Official…

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Oil prices leap higher.

 

Oil prices staged an impressive rally overnight having spent the week ignoring the gloom sweeping other asset classes. Official US Crude Inventories surprised by falling by a much higher than expected 6.40 million barrels. The slow return of production and refining post-Hurricane-Ida being the main culprit. The relentless rise in natural gas prices, now starting to cause nerves to fray in Europe, is also helping to elevate oil prices and is a situation that I believe will get much worse before it gets better.

 

Brent crude carved through $74.00 a barrel on its way to an impressive gain to $75.50 overnight, rising slightly to $75.60 in Asia. $74.00 now becomes a support/pivot point. China’s announcement that it is selling some of its strategic reserves to the domestic market has had zero impact on prices and dips to the $74.00 region should find keen buyers. Brent crude has resistance near by at $76.00 and if that gives way, Brent crude should target the $78.00 a barrel area.

 

WTI leapt 2.65% higher overnight, climbing to $72.60 a barrel, advancing to $72.70 in Asia. Any dips to $71.00 a barrel should be well supported, at least until we see concrete recovery progress from the Gulf of Mexico hub. A rise through the overnight high at $73.10 suggests a test of $74.00 a barrel, which could extend to $76.00 next week.

 

Gold flashes more danger signals.

 

Gold’s price action overnight flashed more warning signs to bullish investors as prices fell despite the US Dollar weakening and US yields remaining barely changed. Gold finished the overnight session down 0.60% to $1793.50 an ounce. Gold rally on Tuesday failed at the 200-day moving average (DMA), and the uninspiring price action overnight is a huge warning signal that gold is living on borrowed time at these levels, with the path of least resistance looking more like lower by the day.

 

Gold has resistance at $1808.50, the 200-DMA which caped gains so well this week, followed by the 100-DMA at $1816.50 and a formidable series of daily highs around $1834.00 an ounce. Support lies initially at $1790.00 followed by the more crucial $1780.00 an ounce zone. Failure there is likely to see gold fall rapidly to $1750.00 an ounce and potentially lower.

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