Oil markets drifting
Oil markets moved slightly lower overnight and today as a lack of new drivers prompted more profit-takers into the market ahead of the FOMC. Brent crude eased 0.55% lower to USD69.15 a barrel, and WTII lost 0.65% to USD65.15 a barrel. That has continued in Asia, both contracts edging another 40 cents lower to USD68.35 and USD64.75 a barrel, respectively.
Although oil’s underlying bullish case remains as constructive as ever, the loss of upward momentum could see both contracts weed out more speculative longs as the week goes on. Brent crude has support at USD66.50 a barrel, and WTI has support at USD63.15 a barrel. Failure sets up markets for a deeper correction ahead of the FOMC, although I expect that plenty of physical buyers will emerge in force on any dip.
On the topside, Brent crude has resistance at USD70.00 and USD71.50 a barrel. WTI has resistance at USD66.50 and USD68.00 a barrel.
Gold remains firm
Gold continues to weather firmer US yields and a stronger US dollar, shrugging of greenback strength overnight to record a 0.28% gain to USD1732.00 an ounce. That has continued in Asia, with the yellow metal edging higher to USD1735.00 an ounce.
Gold is now USD55.00 an ounce higher than last week’s lows, a quiet but impressive comeback. Despite the gains in recent days being modest in scope, it is significant they have come against a backdrop of moves elsewhere that have sent gold lower in recent times. That hints that underlying strength may be returning to markets. Of course, gold has made a career of disappointing bullish outlooks of late. But if it negotiates the FOMC, where I expect the Fed to disappoint markets on holding down yields, it may well be time to call a longer-term low for gold.
Gold has support at USD1720.00 and USD1700.00 an ounce initially. Resistance lies nearby at USD1740.00 an ounce, with the Fibonacci breakout at USD1760.00 an ounce, its largest obstacle. A daily close above USD1760.00 an ounce will signal further gains to USD1800.00 an ounce.