Oil and gold lose ground in Asia

Oil falls in Asia

With mainland China, South Korea and Japan away today, oil trading volumes are thin. Oil eased slightly on Friday as Gulf of Mexico production returns, but otherwise has remained immune to the risk aversion nerves seen elsewhere and US dollar strength. In Asia today, the broad commodity sell-off has flowed into oil markets, which have retreated modestly once again.

Brent crude fell 0.40% to USD 75.30 on Friday, retreating by 0.60% to USD 75.85 a barrel in Asia today. WTI fell 0.90% on Friday to USD 71.90, easing another 0.70% to USD 71.30 a barrel in Asia this morning. Both contracts are likely to continue trading heavily until New York hours as long as the broader commodity sell-off persists, although I do not anticipate an aggressive move lower.

Brent crude has traced out a double top at USD 76.10 which s followed by USD 76.80 a barrel. Support is at USD 74.50 and then USD 73.80 a barrel. WTI has resistance at USD 72.00, followed by more formidable resistance at USD 73.00 a barrel. A fall through USD 71.00 could see a spike lower to USD 70.00 a barrel.

Gold follows other metals lower

Platinum and palladium have been pummelled today in a broad commodity sell-off, tumbling by 3.50% and 3.50% respectively. That has dragged silver 1.15% lower to USD 22.1460 an ounce, and an already fragile gold lower by 0.45% to USD 1746.60 an ounce after finishing unchanged at USD 1755.00 an ounce on Friday.

A lack of liquidity is amplifying moves in metals in Asia today thanks to Northern Asia being on holiday. However, gold’s price action is ominous, especially as US dollar strength persists and US yields continue firming. The next few days ahead of the FOMC could be long ones for bullish investors.

Gold now has resistance at USD 1755.00, having fallen through support at USD 1750.00 an ounce. That is followed by USD 1768.00 and the far more formidable USD 1780.00 an ounce region. Today’s low around USD 1742.50 is potentially a double bottom if gold closes above there this evening, forming a modicum of support. However, gold looks far more likely to continue trading heavily which will set up a test of USD 1720.00 an ounce. From a longer-term perspective, must hold support is at USD 1675.00 an ounce. Failure opens up uncharted territory for gold.

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