The tension in the Middle East has boosted the demand for safe-haven assets, enhancing the allure of gold. Coupled with bets on a rate cut by the Federal Reserve, the price of gold recorded three consecutive daily gains.  

While the impact of the Middle East conflict on oil production is limited, oil prices experienced a slight decline after a 2% rise last week.  

Both WTI and Brent, the two benchmark oils, saw a drop of over USD 1 per barrel on Monday, but the losses narrowed towards the end of the session, resulting in a modest decline. 

Gold >> 

On Monday, the attraction of gold was bolstered by the safe-haven demand arising from the tension in the Middle East.  

Simultaneously, the market increased bets on the Federal Reserve cutting interest rates earlier than expected, leading to a continuation of the upward trend in gold prices observed in the previous two trading days.  

Spot gold closed with a 0.26% gain, reaching USD 2054.50 per ounce, while gold futures rose by 0.36% to close at $2059.00 per ounce. 

According to the CME Group’s “FedWatch Tool,” the probability of the Federal Reserve maintaining interest rates in the 5.25%-5.50% range in February is 95.3%, with a 4.7% probability of a 25 basis points rate cut.  

By March, the probability of keeping rates unchanged is 27.7%, while the cumulative probability of a 25 basis points rate cut is 69%, and a cumulative probability of a 50 basis points rate cut is 3.3%.  

With increasing bets in favor of a Fed rate cut, the higher interest rates elevate the opportunity cost of investing in non-yielding gold. 

On the technical side, during the Asian trading session, gold quickly rose from the opening at the 2047 level to the 2057 level, entering a sideways consolidation.  

In the afternoon, a second attempt to breach the 2058 level faced resistance, leading to a retracement and sideways consolidation, partly influenced by the early closure of the market for Martin Luther King Jr. Day. 

Technical Analysis: 

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks. 

• Key resistance levels to watch in the short term are around 2062-2067. 
• Key support levels to watch in the short term are around 2040-2035. 

WTI Crude Oil >>  

The impact of the Middle East conflict on crude oil production is limited, but after a 2% increase in benchmark crude prices last week, there was a slight decline in oil prices. Both WTI (West Texas Intermediate) and Brent benchmarks had earlier dropped by over USD 1 per barrel.  

On Monday, WTI crude oil fell by 0.32%, closing at USD 72.47 per barrel, oscillating near the 10-day moving average throughout the day. Brent crude oil futures closed at USD 78.15 per barrel, down by USD 0.14 per barrel or 0.2%. 

Market concerns about potential supply chain disruptions and the possibility of OPEC (Organization of the Petroleum Exporting Countries) reducing production have weakened the global energy market’s ability to meet the demand for fossil fuels.  

However, the record-high crude oil production from major non-OPEC countries, such as the United States, and the substantial increase in petroleum and other crude oil derivatives are hindering efforts by barrel traders to push up crude oil costs. 

On the technical side, oil prices experienced a mixed performance, initially facing downward pressure during the Asian-European trading sessions, with prices declining weakly below the USD 72.9 level.  

In the afternoon, there was a further drop below the USD 72 level before stabilizing and rebounding near USD 71.2. During the late U.S. trading session, oil prices saw a significant V-shaped rebound, closing above the USD 72.5 level. 

Technical Analysis: 

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks. 

• Key resistance levels to monitor in the short term are around 74.0-75.0. 
• Key support levels to monitor in the short term are around 71.0-70.0. 

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