Oil and Gold Prices Trade Higher

Oil and Gold Prices Trade Higher

Fundamental Analysis

Gold is trading higher today, as traders are concerned about the fragile economic recovery in the US. The jobless claims along with other economic readings, have confirmed that we are not out of the woods yet and the economic recovery is still extremely weak.

There is no doubt that lockdowns triggered due to the coronavirus have caused massive damage to the US economy, and the fact that we have new variants of the coronavirus has made matter it more arduous. Therefore, investors are more interested in hedging their bets and, this is supporting the gold prices.

Technical Analysis

In terms of technical price analysis, the gold price is still very much trading between the 50-day and 100-day SMA on the daily time frame. The gold price needs to break above both of these moving averages, and it needs to stay above them.

Only then we can say that the bulls are fully in control of the price and the path of the least resistance is skewed to the upside. If the precious metal fails to stay above the 50-day SMA, it is highly likely that we may not only test the 200-day SMA, but the price may actually move below the 200-day SMA which will be negative for the price.

In terms of support, the near term support is at $1,820, while the resistance is at $1,934.

Oil Prices: Fundamental Analysis  

Crude and Brent oil prices are moving higher as investors are optimistic that there isn’t a supply glut. Yesterday’s crude oil inventory data confirmed that oil supply is moving in the right direction, as the drawdown was much bigger than the market expected.

In addition to this, the fact is that we do have economic recovery around the globe, which is supporting the oil demand. Yes, it is true that current lockdowns due to coronavirus are presenting challenges, but investors are looking at things beyond that and they believe that the situation will improve remarkably in the New Year.

Of course, all of this optimism is mainly based on the assumptions that the worst is over with respect to the coronavirus, and if this becomes a reality, the path of the least resistance for oil prices will be skewed to the upside.

In addition to this, investors are also paying close attention to the Brexit situation, and the fact that there is fair bit of optimism that a Brexit deal can finally come in the daylight has also supported the oil prices.

But, the fact is that it is chiefly supporting the optimism and nothing more. This is because what we need is the demand picking up in the two biggest economies of the world, which are China and the US.

Technical analysis

Crude oil prices snapped their three consecutive days of losses yesterday. Yesterday’s price move was very decent as it took the high of the previous day and the price bounced from the support area of 45 to 46. In addition to this, the price is also trading above the 50, 100 and 200-day SMA on the daily time frame, which further confirms that the bulls are in control of the price.

In terms of resistance, it is at $49 to $50.