US Big Chill Boosts Oil
The cold weather sweeping the United States down to Texas has caused rolling power blackouts, a massive spike in electricity spot prices, and taken nearly 1 million barrels per day of production offline, along with refining capacity. On the margins, all of that continues to support oil prices with the Brent crude futures curve in strong backwardation now.
Oil futures on Brent crude and WTI finished around 1.0% higher overnight, although both spiked higher intra-day. Oil has continued moving higher again this morning in Asia. Brent crude has risen 0.60% to USD63.65 a barrel, and WTI has edged 0.30% higher to USD60.30 a barrel.
Although the technical indicators are screaming that a downward correction is imminent to flush out recent speculative longs, the United States’ weather situation will likely continue to offset that. In the bigger picture, the backwardation in the Brent futures markets means that even a violent downward correction is likely to be short-lived.
Until the weather moderates in the United States, though, oil is a buy on dips in the short-term.
Gold Remains Side-Lined
With all the attention on platinum, gold has fallen off investors’ radars for now. Perhaps investors have been burned too often on the inflation and dollar debasement trade with gold and have let their feet do the talking. The rise in the US 30-year yield over 2.0% on Friday is also giving gold bulls pause for thought.
The net result is that gold remains marooned near its two-month lows and has failed to pick up any sort of support from a weaker US dollar in recent sessions. Gold edged lower by 0.30% to USD1819.00 an ounce overnight but has recouped those losses this morning, rising 0.40% to USD1825.00 an ounce.
Hong Kong buyers, returning from holiday, may have given gold some support, and it should still find willing buyers on any drop to USD1800.00 an ounce. The price action is unconvincing though with gold looking unlikely to recapture its 50 and 200-DMA’s, both at USD1856.00 an ounce. Gold will still face resistance beyond that level at its 100-DMA at 1869.00 an ounce. Support is found at USD1800.00 followed by USD1783.00 an ounce, its February low.
As stated, gold’s price action is unconvincing, and it seems destined to aimlessly trade in a USD1800.00 to USD1850.00 an ounce range this week. Gold’s must-hold support remains at USD1760.00 an ounce. Failure signals a much deeper correction lower is on the cards.