Crude stocks compensate for OPEC + nerves
Official US crude inventories and gasoline inventories fell much higher than expected overnight, causing crude prices to spike intra-day. However, subtle hints from Saudi and Russian officials about oil production and inflation dampened the gains. Oil markets have increased the likelihood of an OPEC + move next week to turn on the taps.
Still, Brent crude managed to finish up 0.90% to 75.40 per barrel, while WTI only rose 0.25% to $ 73.25 per barrel. Headlines suggesting the United States is open to continuing nuclear talks with Iran, despite a tough new president, saw oil drop in Asia, with both contracts dropping 15 cents a barrel.
With the OPEC + meeting next week, the possibility that the US-Iran talks may not have died in the water and the Relative Strength Index (RSI) on the two contracts in overbought territory, oil is vulnerable to a weaker short term correction after a strong rally. A speculative long washout should be limited to $ 73.00 for Brent crude and $ 70.00 per barrel for WTI. Unless OPEC + turns on the taps massively next week, any significant drop is likely to be short-lived.
Gold salvage hits brick wall at 1800.00
Choppy range trading continued in gold overnight, with markets generally struggling to settle on a unifying theme, which characterized trading across multiple asset classes this week. Gold rose seventeen dollars to test its 100-DMA at 1,793.00 overnight, before pulling back as comments from Fed officials Bowman and Bostic got it wrong on the hawkish side of the division inflation / interest rate.
Gold ended almost unchanged at $ 1,777.00 an ounce, falling 0.30% to $ 1,774.00 an ounce in Asian trading. With a lack of clear direction and conflicting themes coming from Fed officials, I expect gold to continue its choppy range-related trading. It is bordered by support at $ 1,760.00 and resistance at 100-DMA at $ 1,793.00, followed by $ 1,800.00 per ounce. I expect this range to hold until the end of the week.
The market remains nervous about an earlier take-off of inflationary-style headlines. Its inflation hedge correlation is low compared to its correlation to the US dollar and US yields so far. So gold will remain a sell on rallies, although a low RSI suggests that gold’s path of least resistance may be higher, given the right engine. It could be a much weaker US durable goods impression tonight.