Gold and Crude Oil Talking Points:
- Gold prices rose with risk appetite once again at the mercy of the coronavirus
- News of many more cases sapped market daring
- Crude oil gained, with production cut hopes rising again
Gold prices rose in Thursday’s Asia Pacific session as reports of a surge in new Chinese coronavirus cases dashed this week’s tentative hopes that containment was succeeding.
Hubei province recorded 242 new deaths and a striking 14,840 new cases as of Wednesday. New diagnostic methods apparently accounted for the rise which was far beyond Tuesday’s 2,105 new cases.
The surge weighed on regional stock markets, but it boosted counter-cyclical assets such as gold and the Japanese Yen even though the US Dollar’s own haven bid perhaps limited gains for gold denominated in it.
Federal Reserve Chair Jerome Powell remained upbeat on the US economic outlook Wednesday but said he expected some domestic drag ‘soon’ from the virus.
On the economic front markets will look ahead to official US Consumer Price Index numbers which are coming up later in the session. January’s headline CPI is expected to rise to an annualized rate of 2.5%, from 2.3% in the previous month, but the measure without food an energy costs is tipped to have relaxed a little. Gold’s inflation-hedge properties may be less in demand should that be the case.
| Change in | Longs | Shorts | OI |
| Daily | -4% | 18% | 2% |
| Weekly | 0% | -5% | -2% |
Crude Oil Market Still Sees Production Cuts Coming
Crude oil prices rose slightly through Asia’s Thursday. Naturally virus headlines continue to drive, with any signs of worsening contagion liable to see the markets price in quicker, deeper production cuts.
The Organization of Petroleum Exporting Countries recommended a reduction of 600,000 barrels per day last week. Russia has requested more time to consider this, but its own producers reportedly would like to see current reductions extend through the year’s second quarter at least.
The US energy market continues to look well-supplied with inventories up by 7.5 million barrels last week according to the Energy Information Administration.
| Change in | Longs | Shorts | OI |
| Daily | 8% | -7% | -2% |
| Weekly | 2% | 1% | 1% |
Gold Technical Analysis
Prices have again edged gingerly above their former daily chart trading band and there are signs of a new, nascent uptrend forming from the lows of February 5.
It’s a little early to say whether that range break will hold but, if the uptrend does too, then it seems very likely that it can. Bulls will set their sights on the recent high of $1591.78/ounce set as the intraday peak of February 2. They’ll need to prove they can live sustainably at that altitude before attempting to push back to January’s more notable highs.
However even if they can’t manage that feat anytime soon the bid for gold looks solid around current levels and likely to remain so while virus headlines dominate.
Crude Oil Technical Analysis
US crude oil prices remain clearly range-bound, with those fundamental hopes for reduced production putting the brakes on the steep falls seen earlier this year. The market may try resistance at the range top at $52.30/barrel this week, although the market appears to lack huge conviction at present.
Definite news of supply reduction would probably see the market recover very sharply, but end-demand worries, and signs of plentiful crude on stream from non-OPEC producers could still see prices pressured.
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--- Written by David Cottle, DailyFX Research
Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!
