Gold, Oil Down on Wall Street Sell-off
Oil prices fell overnight, with much of the blame being thrown on the Wall Street stock sell-off. A widening contango on the Brent futures curve and stale long positioning are more likely to be the real culprits. The stubborn contango suggests that immediate and plentiful supplies of oil remain.
Brent crude fell 0.90% overnight in energy commodities. It has drifted another 0.95% lower to USD43.55 a barrel in Asia.
It had capped rallies over the past week. Its 200-day moving average (DMA) at USD45.50 a barrel remains a formidable obstacle to future gains now.
The overnight low at USD43.20 a barrel is initial support. A loss of that level opened a deeper correction to double bottom support at USD41.40 a barrel.
WTI endured a volatile session overnight. That was before ending the day 0.75% lower at USD41.25 a barrel. Moreover, its 200-DMA and a critical support zone.
In Asia, WTI has currently maintained its adverse price action, falling 0.95% to USD40.80 a barrel. A weekly close below its 200-DMA would be a strong bearish signal of more losses to come.
Initial support lies at USD40.25 a barrel, which is WTI’s overnight low. Failure there risks further losses to USD38.50 a barrel in the coming days.
Asian physical buyers are absent this morning, looking at the price action over the past 24 hours. Both contracts look precarious now and will be relying on robust Non-Farm Payroll data this evening. Abundant spot supplies and a nervous equity market will continue to weaken confidence in commodities.
Gold’s Overnight Decline is Positive for Bullish Traders
Gold prices eased overnight. The falls were modest compared to the carnage seen in previous equity markets sell-offs. The resilience shown by gold overnight, shows its bullish longer-term fundamentals remain well and truly intact.
Gold fell only 0.65% to USD1931.00 an ounce overnight, with Asia reclaiming most of those losses this morning. Gold rose back to USD1937.00 an ounce.
Gold’s critical resistance zone between USD1900.00 and USD1920.00 an ounce remained untested. Today’s price action suggests that investors are more than happy to pick up gold on dips. That is, even if they are not inclined to chase prices higher.
Commodity news says Gold looks destined to range trade for some days yet between USD1900.00 and USD2000.00/ounce. A loss of only USD1860.00/ounce will call into doubt the medium-term rally.
