Higher US dollar weighs on oil prices

Oil had a volatile session overnight, with both Brent and WTI trading in two-dollar ranges. Risk-aversion won the day though, with a stronger US dollar pushing both contracts to a lower close. Brent crude finished 1.0% lower at USD43.00 a barrel, and WTI finished the session 0.70% lower at USD40.80 a barrel. With Covid-19 and US fiscal and election risks clouding the consumption picture after soft US jobs data, a higher than expected fall in official US crude inventories softened the bearish tone.

Risk aversion into the week’s end has reasserted itself in Asia though, with both contracts falling another 0.60% in trading today. Brent crude has dropped to USD40.70 a barrel with well-denoted resistance at USD43.50 a barrel now. Support appears at the overnight low of USD41.60 a barrel. WTI has fallen to USD40.60 a barrel, with resistance between USD41.30 and USD41.50 a barrel. Support is at its overnight low of USD39.30 a barrel, followed by USD39.00 a barrel.

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With a stronger US dollar and Covid-19 in Europe and the US clouding the consumption outlook, it is unlikely that oil will recapture the highs seen this week. If anything, downside risks are ratcheting higher sharply.

Haven demand lifts gold

Gold managed to overcome a stronger US dollar overnight, finally seeing haven-driven demand by investors for gold itself, for the first time in a while. That allowed gold to record a 0.35% gain to USD1908.50 an ounce overnight. Asia is trading directionless today, with gold almost unchanged.

The haven-driven demand is set to increase into the week’s end though, as the multiple risks in financial markets seen this week, finally bubble to the top on investor’s minds. Gold remains locked in a USD1875.00 to USD1935.00 an ounce range, but with haven investors returning, the balance of probabilities has shifted to the upside.

With so much event risk on the horizon, culminating with the US elections on November 3rd, we have likely seen the lows in gold for the next month or so. Gold is unlikely to test USD1850.00 an ounce again this month. Gold likely to shift into a USD1900.00 to USD1975.00 an ounce range as the elections draw near.

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