Oil edges higher on stimulus hopes, gold dips

Oil rises modestly overnight

Oil finished the day slightly higher, supported by renewed US fiscal talks. The gains were modest though, with Brent crude 0.10% higher at USD44.20 a barrel, and WTI 0.30% higher at USD41.70 a barrel. Gains were tempered by news that Libyan oil production has recovered to 1.25 million barrels per day.

Both contracts continue to consolidate at the upper end of their November ranges. However, momentum has notably waned, and both are vulnerable to negative headline surprises now.

Brent crude faces challenging resistance at USD45.50 and USD46.50 a barrel, with support quite a distance away at USD42.40 a barrel, its 100-day moving average (DMA). WTI has resistance at USD43.00 a barrel, followed by the formidable USD43.50 a barrel region. Support lies at USD40.45 a barrel, its 100-DMA.

We still see the possibility that long positions will continue to be trimmed into the end of the week, as the initial enthusiasm of the US talks fades.

Gold falls through long-term support

Gold’s unimpressive price action continues, despite the positive news from Washington, DC. Having dropped to USD1850.00 overnight, it could not recover all of those losses as the fiscal talk headlines hit the wires. It finished the session 0.35% lower at USD1866.00 an ounce.

Gold has now broken trendline support at USD1871.00 an ounce, that extends back to April. The daily close below this level is a negative technical development. Gold has initial support at USD1850.00 an ounce, but the technical picture suggests losses have the potential to extend all the way to its 200-DMA, today at USD1794.00 an ounce. Resistance today is at USD1874.00 an ounce, followed by USD1900.00 an ounce.

The waning momentum, and inability to rally materially on what should have been very positive news, hints that the short-term market is still very long with a dearth of new buyers. Although I am sure there are plenty of gold buyers waiting in the wings, they appear to prefer waiting for a more material dip, instead of chasing the market at these levels.