Oil and gold are two of the top tradable commodities in the world. As mentioned here on Market Calls, gold is viewed as a safe haven asset by investors and is turned to during times of economic uncertainty. In contrast, oil is undoubtedly the king of commodities, with investors paying close attention to its volatile prices and production levels. It is also the most important commodity in the world economy. In this article we examine the correlation between gold and oil, and look at its relationship today and in the future.
Gold price action remains muted despite the stock market crashing, global events like trade war, syrian attack. Its been trading in a very compressed range 1300-1350 range since the start of year 2018. Last 4 trading sessions price is making higher high and higher lows which shows the confidence of the players. Price maintains above 200MA since 2018.
There’s a widespread assumption that supply and demand drive oil prices. Almost all economists base their oil forecasts entirely on this premise, and so do many speculators.
If the oil industry ramps up production and increases supply, economists expect a drop in oil prices. If production decreases, or some other factors hint at supply constraints, they anticipate a rise in oil’s price.
WTIC Crude currently trading around 66.13 and local MCX Crude futures trading around Rs4203/ barrel. Current leg of uptrend is almost 7 month old without any steeper corrections. Recent exponential rise are widely believed to be from the tighter supply weak dollar and extreme short term speculators. Short term sentiment is negative which could drive the WTIC price lower to 64 and 62.5 levels.
Since last two years Gold is currently trading in a very broader range 200 point range (1150-1350 on weekly timeframe). Trading sentiment for this week turned to positive which indicates bullish medium term bias. On the Daily Scale Gold is trading in a very tight range between 1265-1285 range and sentiment turned positive on the daily scale as well.
Crude Oil is trading in a very tight range. Very short term trading sentiment turns positive and trend line resistance comes around 49.2 reference where more crowded stops are visible in that reference point. And few more stops are visible around 50.2 zone.
Gold had done a short term trend reversal from the recent swing low of 1251. Trading Sentiment holds positive on both daily and weekly timeframe. Current surge towards 1280 reference brings a possibility of test towards the 1295-1300 band where gold got resisted twice in the same reference.
Silver is firmly trading very close to the previous swing high 16.90 and the daily sentimental RSI continues to be positive for the 15th trading session and currently consolidating around the previous swing high reference. .
Gold is showing signs of breakout on the weekly timeframe currently price is defending around the 1300 reference levels. Sentiment is positive across the timeframes. 1300 is more likely to be the short term key resistance levels. However overall structure of the trend is holding positive and the breakout is imminent.
MCX Copper June futures on last Friday slipped down below 200MA on both daily(366.8) and hourly(366.7) charts. However around the market close, managed to close above 200MA on both the timeframes it is a short term bullish setup as responsive buyers shown support on Friday low around the 361 mark.
Both Short term (Daily Sentiment) and Very Short term sentiment (Hourly) in MCX Crude holds down. Sideways action is expected with a possible test towards 3170. However any sustainable move coming above 3213 indicates resume of short term trend up that is more likely to keep the trend strong in the very short term.
MCX Crude taken short term support at 3119 and bounced back on the hourly charts. Potential medium term supports around 2900. Nymex crude futures is also currently trading around the psychological reference 50 USD/Barrel. However on the daily timeframe price rejection around 200 MA 3316 and started pulling back down and the daily sentiment holds down.