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Oil powers upwards, gold declines



Oil prices spike higher once again

Oil prices, like so many asset classes, went their own way overnight. Improving sentiment around markets being ignored as oil stage another massive rally in thin liquidity conditions. Brent crude leapt 9.15% higher to USD 106.90 a barrel, WTI leaping 9.05% higher to USD 103.60 a barrel. Asia has done what it has done all week, buy oil from the get-go, sending both Brent and WTI another 2.0% higher to USD 108.90 and USD 105.60 a barrel.

A fall in official US crude inventories gave support to prices that spent the day moving higher in Asia anyway, regional buyers showing consistent enthusiasm to buy each time Brent crude dips below USD 100.00. What gave the rally momentum was a warning from the IEA of a “supply crisis,” describing the Russian sanctions as the “biggest supply crisis in decades.”

Of course, the IEA is simply telling everyone the obvious and what seems to be lost on markets, is that nothing will change if a Ukraine agreement is enacted. Russia will still be a pariah and will be for years to come. It seems that the IEA carries more gravitas when it says that than this humble newsletter. I shall try to not be too upset.

Key supports are USD 96.00 for Brent crude and the USD 91.50 region for WTI. A concrete agreement emerging acceptable to both presidents will see both retested.

Gold slips in Asia

Gold rose again in overnight trading, supported by a weaker US dollar and a relatively quiet day range-wise, on US bond markets. Gold rose 0.78% to USD 1942.50 an ounce. In Asia the rally has quickly run out of steam, gold slipping back 0.45% lower to USD 1933.50 an ounce, despite the US dollar being almost unchanged.

The price action in Asia is a warning sign that gold’s recovery rally may be running out of steam, as regional investors usually load up on the gold to hedge weekend risk. I still believe that exact scenario will support gold prices intraday from here, with losses limited.

Gold has resistance into USD 1960.00 an ounce, its previous capitulation point. Support lies at USD 1900.00 and then USD 1880.00 an ounce. A sustained failure of the latter signals gold’s torment continues and that USD 1800.00 an ounce beckons.

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