Oil heads back into summer doldrums
The rally sparked by the US Crude Inventory data on Wednesday has fizzled out as fast as it began. Reflecting the sluggish nature of markets elsewhere, oil has given up most of those gains and slipped back into summer doldrum range-trading territory.
Brent crude eased 0.60% lower to USD45.00 a barrel, and WTI fell 0.50% to USD42.30 a barrel. Both contracts are sharply unchanged in Asian trading. Although both contracts continue to consolidate at the upper end of their two-month trading ranges, they lack the momentum to stage meaningful rallies at this stage. It would appear that oil has fallen off many investors’ radars for now, which may explain partially the lack of volatility.
Oil’s long hot sleepy summer looks set to continue for some time yet.
Fast money returns to precious metal longs
Both gold and silver outperformed overnight. Gold rose 2.0% to USD1953.50 an ounce, and silver rose a mighty 7.60% to USD27.4800 an ounce. Precious metals completely ignored developments in other markets, notably the firming of US yields. The ranges seen overnight imply that the fast money that was pummelled out of long positions earlier in the week continues to dip its toes back in, establishing new long positions.
The nature of the FOMO crowd is that the positioning is not sticky. It will head for the exit door at the first sign of trouble, especially after the emotional onslaught it suffered on Tuesday. Both gold and silver, therefore, are still vulnerable to sharp dips at the first hint of trouble, be it negative headlines or substantial real money flows.
Asian markets are moribund today, with both gold and silver unchanged at midday. Gold has nearby resistance at USD1966.00 an ounce, with support at USD1913.00 an ounce, the overnight low. Silver has resistance nearby at USD27.7250 an ounce, with support at USD25.2800 an ounce, the overnight lows.
Like David Bowie, I was a hero, just for one day, by calling for lower gold and silver this week. Gold’s next move is unclear at these levels, with the risks evenly balanced either way in the near-term. One thing is absolute, though, the remarkable volatility will continue, and investors will need deep pockets and a strong stomach.