Battered by every coronavirus vaccine headline, gold has become the financial market’s version of ‘The Walking Dead.’ Down 8.8% over the last three weeks, gold’s shine is fading with each passing day. However, when sentiment turns this bearish, it’s usually wise to take the other side of the trade. On Friday and Monday, gold breached its lower Bollinger Band and its RSI is currently at 29 (the lowest reading since March 19, 2020).
On Monday, gold also tested – and defended – the 78.6% Fibonacci retracement level. If it holds $1,749, the precious metal can reclaim its 200-day moving average and has a pathway back to $1,819.
The two-way setup is positive: If 78.6% holds, open a long position and ride the momentum to $1,819. If 78.6% breaks, get short and ride the momentum down to $1,660.57 (the 100% Fibonacci retracement level).
As for fundamentals, the outlook remains cloudy. Vaccine optimism continues to slaughter safe-havens, and the U.S. money printer remains out of service for the time being. Regardless, the coronavirus crisis is far from over. And because Janet Yellen – the former chairperson of the U.S. Federal Reserve – was officially nominated as Joe Biden’s Treasury Secretary on Monday, it won’t be long before the ‘Brrr’ ramps up again.
Partying like it’s 2002, WTI has added nearly $10 to its name in less than a month.
Right now, crude is trading 7.0% above its 20-day moving average and 10.7% above its 50-day moving average. The next level of support – the 23.6% Fibonacci retracement level ($43.27) – is also 4.8% below the current price ($45.45). In addition, WTI breached its upper Bollinger Band last Wednesday and hasn’t recouped that high ever since. And the icing on the cake? Crude is showing its highest RSI since June 22, 2020.
Like the stock market, WTI continues to ride the vaccine wave. However, fundamentals remain a mess. Just last week, Bloomberg reported that crude stockpiles (as of November 13) are at 81% of capacity (61.6 million barrels) and are only 3.83 million barrels below May’s oversupply peak. In addition, U.S. Energy Information Administration (EIA) data – for the week of November 18 – showed that gasoline demand fell by 504,000 barrels-per-day (week-over-week). It was the largest WoW decline since May.
Finally, OPEC president, Abdelmadjid Attar, told the group on Monday that “The shock to the oil industry is massive and its severe impacts will likely reverberate in the years to come.”So with their three-month supply-freeze already priced in – what’s left to move WTI higher.
All views, news, analysis, quotes, or other information from Rockfort Group and its subsidiaries are general market commentary only and does not constitute investment advice. Before making any investment please consult your financial adviser.