Oil stabilises in Asia
Oil prices suffered a mini-collapse overnight, both Brent crude and WTI falling over 7.0% to USD62.90 and USD59.60 a barrel, respectively. The scale of the tumbles caught me by surprise, in all honesty, and it appears that the level of speculative long positioning out there was much higher than I thought.
As expected, Asian physical buyers have leapt at the chance to load up on cheap oil, and both Brent and WTI have rallied by 1.0% to USD63.50 and USD60.10, respectively. Europe aside, nothing has fundamentally changed in the oil markets. Assumptions that OPEC+ will increase supply next month are just that, dangerous assumptions, especially if prices were to remain at these levels.
More than likely, now that a culling of the herd has happened, oil’s bullish underlying case will reassert itself, and I do not expect prices to remain down here for very long.
Brent crude has initial support at USD61.50, it’s overnight low, followed by USD60.00 a barrel. I will acknowledge that the failure of the latter may flush more stop-loss selling out of hiding. Resistance is distant at USD66.50 a barrel. WTI has support at USD58.50 and USD57.50 a barrel, with resistance at USD63.00 a barrel.
Gold eases, but only modestly
Gold beat a fighting retreat overnight, tactically withdrawing ahead of higher US yields and a firmer greenback. The retreat was modest, though, with gold falling USD9.00 an ounce to USD1734.00 an ounce. That performance is all the more impressive compared to the scale of previous falls this year when US yields have spiked.
Gold is slightly lower at USD1733.00 an ounce in quiet Asian trading. Most importantly, it remains higher on the week, and the technical picture clearly shows that gold is attempting to trace out a long-term bottom in prices between its 50.0% and 61.8% Fibonacci retracement levels.
Gold has support at USD1720.00 and USD1700.00 an ounce, followed by the 61.80% in the USD1685.00 area. It has initial resistance at USD1755.00 an ounce, followed by the 50.0% retracement at USD1760.00 an ounce. Gold will likely range between USD1720.00 and USD1740.00 an ounce through Europe as we await bond market developments in the US this evening.
