Oil slips gold under pressure

Oil slips gold under pressure

In a high-volatility week, oil markets are in a league of their own. The Moderna CEO’s vaccine efficacy remarks yesterday triggered another extensive drop in oil prices. 

Brent crude closed 4.50% lower at USD 70.15 a barrel, having traded under USD 68.00 intraday. WTI collapsed 4.40% to USD 66.95 per barrel, having tested USD 64.50 intraday.

With risk sentiment lifting slightly and the decline in prices irresistible to physical bargain hunters, Brent and WTI have surged by 0.85% to USD 70.8 and USD 65.65 in Asia. Nevertheless, it must be remarked that the gains this morning are only a tiny dent in the scale of the declines seen in the past four sessions. While positive virus headlines present an excuse for fast-money buying, the lower side still seems more insufficient.

Gold is in trouble

Gold’s price action proceeds to underwhelm, as it finished the overnight session below 0.55% at USD 1775.00 an ounce before eking out a 0.20% increase to USD 1778.70 an ounce in Asia almost a rerun of the price action yesterday. There are zero indications of any safe-haven bids developing to shelter from virus volatility. It is dropping, notwithstanding both US yields and the US dollar also dropping. Gold has entered its third consecutive daily close under its 50,100 and 200 DMAs gathered between USD 1791.00 and USD 1792.20 an ounce, yet another bearish signal.

Gold will have resistance at $1800.00 and $1815.00, while yesterday’s low at $1770.00 an ounce has traced out a double bottom support level. A collapse of $1770.00 now signals a retest of $1760.00 and $1740.00 an ounce. This week, a move lower to $1720.00 might happen. This will be the case if the Non-Farms puts the Fed taper front and center after yesterday’s hawkish tone to the Powell testimony.