Oil drifts higher as range-trading continues

A fall in US gasoline inventories by 4.85 million barrels overnight offset the unexpected rise in official crude inventories by 5.65 million barrels. That limited any negative sentiment and reassured investors that petroleum consumption remains robust in the US, despite the economic hit caused by the increase in Covid-19 cases across the sunbelt states. With sentiment balanced, oil followed equity markets modestly higher. Brent crude rising 0.70% to $43.10 a barrel, and WTI rising 1.0% to $40.85 a barrel.

Both contracts are unchanged this morning in Asia, with critical resistance on Brent crude at USD 44.00 a barrel, and on WTI at USD 42.00 a barrel. Only a fall below USD 40.00 a barrel for Brent crude, or USD 37.00 a barrel for WTI, would suggest that the rally in oil prices has run its course.

Oil prices continue to remain balanced between Covid-19 induced growth concerns, and recovery expectations in Asia and Europe. Oil’s downside is likely to be limited unless the US situation deteriorates dramatically. OPEC+ discipline is high, and the grouping will no doubt find the willingness to extend the headline cuts if the situation calls for it.

Gold finally breaks USD 1800.00 an ounce

Gold finally found the momentum to successfully break through formidable resistance at US 1800.00 an ounce overnight. As expected, the move through USD 1800.00 sparked a quick jump to USD 1819.00 an ounce, as stop-loss, model and algorithmic buyers leapt into the market. After the initial frenzy died down, gold settled back to USD 1809.00 an ounce, recording a 0.80% gain for the session.

With the US real yields continuing to track deeper into negative territory after last night’s 10-year note auction, and with the USD 1800.00 level monkey of its back, gold is now well poised to make new, and possibly rapid advances higher.

Gold’s next technical target is the September 2011 high at USD 1921.00 an ounce. The charts show no technical resistance of note in between. Sell-offs should now be contained by USD 1795.00 an ounce, USD 1780.00 an ounce at worst. Intra-day resistance lies at the overnight high at USD 1819.00 an ounce.

Gold is unchanged at USD 1809.00 an ounce in Asia, in line with the quiet day being displayed in other asset classes. With New York’s session leading the moves, Asia will remain content to watch from the side-lines. With negative real yields, across the US yield curve though, gold should now find plenty of willing buyers on any intra-day dip.