Fundamental & Technical Analysis: Gold And Oil

Gold

The precious metal is out of luck once again, it is trading below the critical level of $1,300. The reason we are not seeing any rally in the gold price is mainly due to the strength in the US economic data. This has two impacts: firstly, traders are more interested in pouring money in riskier assets. Finally, they do not believe that the Fed is going to maintain the same monetary policy stance which they currently hold.

Moreover, it seems that the trade tensions between China and the US are also going to be resolved fairly soon. Nonetheless, from a hedging perspective, the gold price at its current level is very attractive.

Looking at the daily chart, the price needs to hold above the critical level of 1276. This was the lowest level the price formed back on January 21st. If we break this support zone, it is likely that the price may continue its move towards the $1,250 mark.

We do not expect any major move in the gold price today, I think traders are going to look at the Chinese GDP and industrial production numbers (which are due tomorrow). If we see any improvement in these numbers, it will only strengthen the demand for the riskier assets. Remember, China is the second biggest economy in the world, and an improving economic picture In China means improving the world economy.

Oil

The WTI price is trading in the negative territory, building on the losses which we witnessed yesterday. Year to date, we are still up whopping 36%, a performance which cannot be neglected. Naturally, traders do want to take some profit off the table, especially given the gains we have seen YTD.

US crude oil inventory data is under focus and we have already seen these inventories going higher in the last week's print. The rising inventory data has raised many questions for investors, no one wants to see the oil glut again.

Looking at the oil supply equation, Russia has clearly reduced its oil output to 11.25 million barrels a day, a number seen at the beginning of April. OPEC alone cannot control the oil supply, it needs corporation from non-OPEC countries. Another reason for the current pullback in the oil price is also down to the fact that there are rumors in the market about Russian oil supply cut. The country may back out of the current oil supply cut deal. If this rumor becomes a reality, we can see a serious pullback in the oil price.

In terms of technical analysis, we see the current support at a level of $61, and a break of that will open the door towards the next level which sits at $58. The upside is capped by the resistance level of $64.79, the highest level the price touched on April 9th

Chief Market Analyst

Naeem Aslam

© Scoop Media