Oil partially reverses losses
Oil prices continue to trade in a choppy but ultimately range-trading manner. News that China was releasing some strategic oil reserves into domestic markets put the bears in the ascendancy. However, I suspect a lower than expected fall in official Crude Inventories had more to do with the falls. Brent fell by 1.80% to $71.35, and WTI slumped by 2.0% to $67.95 a barrel.
The Biden/Xi phone call has had the same effect on oil markets as it has other asset classes, with any hope that US/China relations, no matter how small, are construed as positive for global trade and basically almost every asset. Oil markets are no different with the China reserve story quickly forgotten as Brent crude and WTI rise 0.75% in Asia to $71.85 and $68.50 a barrel.
The Biden/Xi phone call should be a powerful enough incentive to keep the music playing into New York, and I expect oil to continue retracing its losses and climb to the top of its recent range.
Brent crude has resistance at $73.20 and $73.70 a barrel, with support at $71.00 and $70.50 a barrel. WTI has resistance at $68.85 and $70.50 a barrel, with support at $67.50 and $67.00 a barrel. It would be a huge surprise if oil finished the week outside of those ranges.
Gold remains punch drunk
The fall in US yields and easing of the US dollar was enough to lift gold slightly higher yesterday, rising 0.30% to $1794.50 an ounce. In Asia, it too has received a modest US/China tailwind as it climbs another 0.20% to $1798.00 an ounce.
In the bigger picture, gold still looks punch drunk, and its price action is most unimpressive. The balance of risks continues to be skewed to the downside, with gold’s upward momentum vanishing this week. Even when US yields and the US dollar fall, gold can still not create a meaningful rally, suggesting that there are many stale speculative long positions out there.
Gold has contracted into a narrow $1780.00 to $1800.00 an ounce range, and a break higher unlikely to seriously test the 200-DMA at $1809.40, or the 100-DMA at $1815.90 an ounce, let alone the much more formidable $1835.00 an ounce region. Failure of nearby support at $1780.00 an ounce could see stop-loss selling emerge, pushing gold quickly lower to $1750.00 an ounce.