With the US closed on Friday, Asian markets have had precious little direction to start the week. Like currency markets, oil traders are reluctant to jump all in on the recovery momentum displayed by equity markets today. Oil prices seem evenly balanced between opposing forces at the moment. On the one hand, the procession of economic data released last week is emphasising that a global recovery is underway for now. On the other, having rallied so far on so little since mid-March, nagging doubts over the recovery’s longevity are capping gains.
Chief amongst those, is the explosion of Covid-19 across the US sunbelt, as well as an increase in new localised lockdowns across countries that have ostensibly reopened. Fears that this could derail consumption growth is tempering exuberance of the most ardent bulls at the moment.
Brent crude and WTI have edged higher in Asia as the US dollar weakens. Brent crude is higher by 0.40% to $42.90 a barrel. WTI is 0.35% higher to $40.40 a barrel. The critical resistance level for Brent crude remains $44.00 a barrel, and for WTI, it is $42.00 a barrel. Until a daily close is seen above either, we remain in a range-trading mode, with prices moving on the whims of intra-day sentiment.
Gold continues consolidating in a directionless market
Gold is unchanged at $1773.00 an ounce for the second day in a row, with volumes and ranges muted by the US holiday on Friday. The yellow metal is almost exactly mid-range of the $1750.00 to $1790.00 an ounce four-week range.
The return of the US this afternoon will inspire more volatility, with bullish traders likely to be disappointed in the near-term. Should the peak-virus sentiment sweeping Asia mysteriously today continue into the US trading session – and I see no really for it to not – some selling pressure will emerge in gold at these levels. The expected fall, though, should be mollified by a weaker US dollar.
The net result is that gold prices are likely to continue bouncing around aimlessly within the greater four-week range. Gold is lacking the momentum to attempt a material assault on long-term resistance at $1800.00 an ounce. Buyers appear content, for now, to bide their time and pick up long positions on dips to the $1760.00 an ounce region, rather than chase the market higher.