Oil up on Putin comments, gold fades

Oil markets staged a strong comeback overnight, as US stimulus talks continued to progress positively, and after the Russian President said that OPEC+ could roll back the easing of production cuts if necessary. Mr Putin did note though that he saw no need to do so at this time, something completely ignored by markets, which focused on the intent of the comments instead.

Brent crude 1.70% to USD42.40 overnight and has gained 0.40% to USD42.60 a barrel this morning. WTI rose 1.45% to USD40.45 a barrel and has risen 0.35% to USD40.75 a barrel this morning. The rallies in the past 24 hours have moved both contracts back to the middle of their October ranges, meaning we have had a lot of tail-chasing noise, but very little substance for the efforts.

Gold fades with dollar strength

Gold’s story was a US dollar one overnight, moving lower as the greenback recovered losses and US Treasury yields continued to remain firm. Gold fell 1.10% to USD1904.00 an ounce overnight, rallying modestly to USD1907.00 an ounce after the US presidential debate ended without incident.

Gold’s range continues to compress within a symmetrical triangle formation that suggests a substantial breakout is near. Although gold fell overnight in directionless trading, it is still finding willing buyers on dips to USD1900.00 an ounce, suggesting that the topside remains the most vulnerable. We expect that as the US election draws nearer, investors will increase their gold hedging and that gold prices will breakout to the topside.

The bottom of the triangle lies nearby at USD1898.00 an ounce this morning, followed by the 100-day moving average (DMA) at USD1880.00 an ounce. A daily close below USD1898.00 postpones the rally for now, with gold’s upside potential negated by a daily close below the 100-DMA. Resistance appears at USD1923.50 an ounce, the 50-DMA and then the top of the triangle, today at USD1929.00 an ounce.