Opposing forces becalm oil prices
In comparison to other markets, oil had a quiet night. Oil prices remain contained by fears of a renewed US economic slowdown on the one hand, and vaccine hopes on the other. That led to a sideways session for oil with Brent crude inching 0.20% higher to USD43.10 a barrel, and WTI creeping 0.50% higher to USD40.80 a barrel. Asia has continued in the same tone, both contracts inching 20 cents higher today.
In the bigger picture, despite the extended period of range trading by both contracts, oil continues to consolidate at the top end of its two-month range. Increasing hopes that a solution to Covid-19 is getting nearer sooner, increases the odds that oil’s next move is higher.
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A breakout by Brent crude through USD4.00 a barrel sets the scene for a possibly rapid move higher to its 200-DMA at USD48.00 a barrel. The picture is much the same with WTI. A breakout through resistance at USD41.60 sets up a similar move to its 200-DMA at USD44.00 a barrel.
With oil’s daily range contracting ever tighter over the past week, a strong directional move appears to be imminent.
Gold lifted by silver bullets fireworks
Gold moved higher by 0.40% to USD1817.50 an ounce overnight, a stone’s throw away from resistance at 1819.00 an ounce. Gold was lifted by a weaker US dollar and fireworks in silver, which climbed 3.0% to USD19.3300 an ounce overnight.
Today, all the action is again on silver, which has advanced through USD20.00 an ounce, triggering stop-loss buying, jumping 2.0% to USD20.3150 an ounce. Liquidity is always an issue with silver, being on average much less than is available with gold on any given day. That partially explains why directional silver moves are usually much more aggressive and grander in scale than those with gold.
Having bottomed under USD12.0000 an ounce in March, silver has now risen by some 75.0%. Meantime, the XAU/XAG ratio collapsing from 128.00 to 89.634 today. That multi-month fall in the XAU/XAG ratio has likely provided a steady supply of sellers all the way up in gold, possibly slowing its advance. That was probably the case overnight as well, with the ratio falling by 2.55%.
However, gold has now advanced to USD1819.00 today, with silver’s rally inevitably dragging spot gold higher, despite the ratio selling. A move through USD1820.00 an ounce should see more stop-loss sellers, as well as model-driven buyers hit the market. That could lead to a reasonably rapid spike by gold into the mid-1830s an ounce, reinvigorating gold’s rally.
Bitcoin remains off the radar
Bitcoin has remained entrenched in a range of USD9000.00 to USD9500.00 for over a month. The fall in volatility has led to a decline in participation by get-rich-quick FOMO traders, leading to a self-perpetuating negative feedback loop.
With precious metals marching higher, and signs that the V-shaped recovery trade is about to re-energise, Bitcoin looks poised to retest the bottom of its range, as its anarchist safe-haven appeal fades amongst the tin-foil hat, anti-5G brigade.
A failure of the USD9000.00 real fiat-currency support could see Bitcoin spike to the USD8350.00 zone, where both its 100 and 200-DMA’s are currently residing.