Oil’s luck runs out

Oil fell for the second session in a row overnight and has continued lower in Asia, as fundamentals reassert themselves. Any hope of a gargantuan US fiscal stimulus package is almost gone. Covid-19’s rampage across Europe and the US is likely to deliver a hit to consumption. With no concrete evidence that OPEC+ is moving to slow or reverse the pace of production increases, the supply/demand imbalance has capped oil’s pre-election rally.

Brent crude fell 1.25% overnight to USD40.65 a barrel, failing ahead of its 50-day moving average (DMA). It has eased another 1.60% in Asia to USD40.00 a barrel leaving it poised for further losses to USD39.00 a barrel initially.

WTI fell by 1.60% overnight to USD38.50 a barrel, also failing ahead of its 50-DMA. In Asia, it is has retreated lower by another 1.80% to USD37.80 a barrel, with the next technical support around USD37.00 a barrel.

With fundamentals reasserting themselves, oil will need soothing noises from OPEC+, or an upside surprise by tonight’s Non-Farm Payrolls to find some solace and support.

Gold breaks multi-month resistance

With the US dollar in full retreat, and US Treasury yields falling, gold finally found the momentum it needed to break higher. Having invalidated the symmetrical triangle, gold broke through what was multi-month trendline resistance at USD1913.60 an ounce. Gold powered to USD46.00, or 2.45% higher to close at USD1949.60 an ounce.

With the world reverting to a zero per cent yield one, resetting the clock to the pre-election environment, gold’s bullish fundamentals are rapidly reasserting themselves. No matter what the election result in the US is now, gold and silver look set to resume their longer-term path higher.

With some profit-taking evident in US equity futures and the US dollar this morning, gold has retreated modestly to USD1938.00 an ounce. However, there should be legions of willing buyers into the USD1910/20 an ounce region, which was previous resistance.

Gold has initial resistance at the overnight high around USD1953.00 an ounce, followed by USD1960.00 and USD1975.00 an ounce. None of that technical resistance is significant though, and the road to USD2000.00 an ounce is less obstructed than it has been for some time.