Oil gains ground, gold stabilizes

Oil rises overnight as equities find their feet

With a modicum of confidence returning to equity markets, oil managed to find its feet, with both Brent and WTI’s 100-day moving averages (DMA’s) providing support. Brent crude rose 0.60% to USD41.74 a barrel, and WTI rose by 1.40% to USD40.15 a barrel. This morning in Asia, with equities performing strongly, both contracts have risen another 0.60% to USD42.00 and USD40.40 a barrel.

The moves higher overnight and today look entirely driven by slivers of confidence appearing in other asset classes. Talk of support from the fall in US crude inventories is just that, talk. Oil actually fell on those numbers initially, and as such, is a classic case of looking for news stories to fit the price action. Fundamentally, nothing has changed to the supply side of the equation that is weighing on oil prices in the bigger picture. I also believe that another 10% drop in prices from here will force OPEC+ to revisit their production cut agreement.

In the short-term, the 100-DMA’s on Brent crude at USD41.40, and WTI at USD38.85 a barrel, are providing reliable support, as they have done all week. Unless those supports give way, or equity markets take a sudden turn for the worse, oil is likely to range-trade into the week’s end.

Gold stabilises near its lows

Gold contented itself to follow intra-day moves on equity markets overnight, suggesting that the buy the dip mob remains side-lined for now, either licking their wounds after going long at USD1900.00 an ounce, or expecting better levels to buy more.

Gold probed the downside during the New York session, but support at its 100-DMA at USD1845.50 held firm and is key pivot level for today’s session. Gold finished the session 0.25% higher at USD1867.00 an ounce, in line with the non-descript close on US equity markets. Notably, though, it is failing to follow Asian equity or US futures markets higher this morning. That suggests that Asian investors remain nervous about gold prices at these levels.

Gold has initial support at USD1845.50 an ounce as stated, followed by USD1800.00 an ounce. Resistance lies at USD1880.00 an ounce with a break back above USD1900.00 an ounce likely to suck in FOMO buyers.