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Energy & Precious Metals - Weekly Review and Outlook

Oil: Weekly Settlements & WTI Technical Outlook

Oil prices rose for both Friday and the week, but gains were capped by the ability of bears in the market to offset some of the optimism brought by the bulls, despite fuel at U.S. pumps itself hitting record highs.

Two days of impressive gains that took the U.S. crude’s West Texas Intermediate grade to an eight-week high and briefly above its U.K. rival Brent for the first time since 2020 were offset by two days of equally surprising setbacks, capping weekly gains for both crude benchmarks.

At Friday's settlement, London-traded Brent for July delivery was up 87 cents, or 0.8%, to $112.91 a barrel. The global crude benchmark was up 1% on the week, hitting a seven-week high of $115.69 on Tuesday.

New York-traded West Texas Intermediate for July delivery was at $110.35 a barrel, up 46 cents, or 0.4% on the day.  

Investing.com data showed the prior Friday's July WTI settlement at $110.49, giving the U.S. crude benchmark a nominal loss on the week, despite it scaling an 8-week high of $115.56 on Tuesday.

As WTI continues its firm momentum continuously supported by weekly middle Bollinger Band as well as 100 Day SMA, the week saw more bullish action retesting 115.50 before closing the week at 113.23, up $8 from the weekly low of 105.13 which indicates readiness to test 116.60 and 119.40.

“If bullish momentum gains enough buying support, WTI can extend its upside to $123.70,” said Sunil Kumar Dixit, chief technical strategist at skcharting.com.

“The upside is critically dependent on prices holding above the $108.50 level,” he added. “Breaching this support will push WTI down to $105, which is an invalidation point for the current uptrend.”

Gold: Weekly Market Activity & Technical Outlook

Gold prices rose 2% on the week to give longs in the game their first weekly win in five.

While they may have secured a break from their gloom which began in mid-April, bulls in bullion still appeared to be on a knife's edge given the dollar’s potential to reprise 20-year highs, analysts cautioned. 

Typical with its contrasting fashion to gold, the Dollar Index, which pits the greenback against six other major currencies, posted its first weekly decline in six. At Friday’s level of 103.23, the index wasn’t too far from the week-ago peak of 105.06, which marked a high since 2000. 

Another bugbear for gold are U.S. bond yields.

The yield on the benchmark U.S. 10-year Treasury note has moved down to 2.79% from May peaks of 3.2% on expectations that forthcoming Fed rate hikes in June and July will be capped at a half-percentage point each round, instead of the initially-speculated three-quarter point. Yet, with rate expectations often moving on a dime, yields could jump too.

“The second half of the week has been kind to gold as the trepidation in financial markets has shifted slightly from the pace of monetary tightening to recession risks,” said Craig Erlam, analyst at online trading platform OANDA. “So rather than higher yields and a stronger dollar weighing on the yellow metal, we've seen investors pouring into safe havens which have lowered yields slightly and lifted gold.”

Front-month gold futures for June on Comex settled at $1,845.10 per ounce, up $3.90, or 0.2%, on the day. Week-to-date though, June gold was up almost $34 or 1.9%. 

It was a tumultuous week for futures of the yellow metal which plunged on Monday to $1,875, its lowest level since the Jan. 28 bottom of $1,779.70.

Erlam said it was tough to make a call on whether gold could extend its current rebound based on expectations that upcoming Fed hikes had been baked into the cake.

“Whether that will be sustained in this hiking environment will be interesting and ultimately depend on just how real and significant the economic fears are,” he said. “At the end of the day, rate hikes should lower demand but so should a recession. If the latter continues to be viewed as a likely outcome of the former, gold could see its fortunes improve further.”

Dixit said gold is likely to test in the week ahead the $1867 mark, which is the 38.2% Fibonacci level of swing high to $1998 and the low of $1,787. 

“Gold needs to stay firm above $1858 for continuation of upside momentum as weakness below the level will cause corrections to $1,836-$1,825-$1,800 and the weakness can extend again to the $1,780-$1760 levels,” said Dixit, whose calls on gold are based on the spot price of bullion.

Adding to gold’s momentum was its oversold weekly stochastic reading of 20/19, the chartist said. “This calls for rebound,” he added. “However, the momentum will largely depend on the 10-year Treasury note’s yields remaining under 2.80% and dropping to between 2.60% and 2.40%.”


Reference by: Investing.com

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