Crude Oil Slides While Gold Eyes Recovery as Rates Ease

What to Know

• Crude oil weakened after falling below the 200-day EMA.
• Markets are increasingly pricing in reduced Middle East supply disruption risk.
• Oil could find stronger support near the $70 level.
• Gold is stabilizing as US interest rates begin to soften.
• A move above $4,600 could open the path toward $4,900.
• Falling yields and improving risk sentiment remain key market drivers.

The backdrop of course is going to continue to be a bit of a fluid situation, but at this point, I think you have to look at this backdrop as one that is changing a bit.

I recognize that quite frankly, the noise coming out of the Middle East will not abate anytime soon, but it does appear that we are more likely than not to go to eventually see some type of peace. And that has major ramifications for expectations about the overall flow of oil, or for that matter, just the flow of commodities through the Strait of Hormuz.

Furthermore, it has major ramifications for what happens in the interest rate markets and that is a huge driver of where we go in most markets. So, it appears that we are seeing more risk appetite jumping into the market and that of course should help quite a few assets.

Light Sweet Crude Oil

The light sweet crude oil market broke below the 200-day EMA early on Tuesday, but quite frankly, I think this is yet another overreaction. Now, I could see oil dropping down to the $70 level, but that is an area that I think will be difficult to break down below.

Furthermore, you have to keep in mind that oil stockpiles are really low globally, and that will be a major influence as well. The supply chain has been completely dismantled so with that being said, I think you have to accept the fact that although we probably have the near-term sell-off, eventually the buyers will come back into the picture. I think $70 makes the most sense. In the very short term, it’s likely that signs of exhaustion on short-term charts will be selling opportunities.

Gold

The gold market continues to pressure the 200-day EMA and if we can get the interest rates in America dropping from here, and so far they are, that could put upward pressure on gold, perhaps driving it towards the $4,600 level. Breaking above there opens up a bigger move towards the $4,900 level.

Short-term pullbacks probably end up being buying opportunities, but if for some reason were to drop below $4,000, that’d be very bad news. I think we are getting pretty close to the end of the selling pressure and when you look at the longer-term chart, it’s just a nice pullback, that’s all this is, and now we are starting to see value hunters push this market.

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