Oil goes up on coal, gold under pressure
Coal lifts oil in Asia
Hong Kong coal futures jumped 9.0% this morning, meaning the energy crisis in China has returned to investors’ minds. It also pushed up oil prices in Asia, with Brent crude rising 0.80% and WTI increasing 1.0%.
Oil prices continued to climb on Friday, with no sign of OPEC + opening the pumps or any announcements by the US government on SPR publications. Brent crude ended up 0.90% at $ 84.90 and WTI ended up 1.25% at $ 82.50 a barrel. In Asia, Brent crude rose to $ 85.65 and WTI to $ 83.40 a barrel as coal futures explode in space.
With no signs of an upcoming easing of the energy crisis in China, and with the rest of North Asia and Europe competing for scarce energy supplies, particularly gas, the pricing environment oil remains constructive. Even an American or Chinese SPR version will likely only provide temporary relief. A rapidly reopening aviation sector, with a slew of ASEAN reopening announcements last week, will be another point of price pressure.
Brent crude is now expected to aim for the October 2019 high of $ 86.80 and $ 90.00 per barrel, with support at $ 84.25 and $ 82.00 per barrel. WTI now has significant resistance up to the $ 89.00 regions, although I would expect some sellers to appear above $ 86.00 per barrel initially. Only a drop to 82.00 USD per barrel changes the bullish outlook.
If Brent crude goes to $ 90.00 a barrel, I would expect the pressure on OPEC + to escalate a few notches against the US White House. The enormous weight of speculative long positioning in oil futures means that a sudden drop to $ 5-8 a barrel could still occur in the event of a general shock. However, with the underlying oil fundamentals so strong, any significant decline will reverse just as quickly.
Nervous specs cut long gold positions
Although the US dollar ended roughly neutral on Friday, higher yields across the entire US curve were enough to scare off speculative gold buyers. This saw the rush for the expected exit gate, and gold fell rapidly 1.60% to close at $ 1,767.50 an ounce. Early in Asia, gold recovered some losses, advancing 0.25% to $ 1,771.50 an ounce.
Friday’s price action says a lot about the gold market now. The weakness of the US dollar at the start of last week soured gold buying and attracted speculative buying in quicksilver. The equally rapid unwinding of most of those gains on Friday reinforces the fact that much of the gold rally was built on speculative hot air and that these long positions have little or no appetite to carry. pain in those long positions. Overall, the lack of resistance from long positions in gold suggests that it will struggle to maintain bullish momentum even if gold hits $ 1,800.00 an ounce. Go up the stairs, go down through the sixth floor window.
The strengthening of US yields, if they continue this week, will be a hindrance to gold’s rally, especially if it leads to the strength of the US dollar. Gold has near support at $ 1,765.00 followed by $ 1,745.00 an ounce with a failure reopening a test of $ 1,720.00. Gold fell for the third day in a row on the 100 and 200 day moving averages (DMA), today at $ 1,795.40 and $ 1,796.60 per ounce, a formidable resistance.
Overall, only a rise of $ 1,835.00 an ounce would trigger a multi-month reverse technical setup in the head and shoulders and bring the outlook for gold down to a positive level. The risks remain resolutely on the downside.