Brent Crude & Gold outlook : Special update

No clarity on immediate directional bias on Brent Crude

There are no signs of relief for Brent Crude, now under pressure to stay above $50. The strategy was not to stay "short Brent" at/below $50; it did recover from around 49.50, but didn't have the steam to extend beyond 52.50 or so, and now back at $50. There is unanimous expectation of Brent Crude recovery into $65 in 2015, the uncertainty is the turning point; now seen anywhere at $40-50. There are no major triggers in the near term to change the bearish undertone (and the trend) from geo-political factors or demand-supply dynamics or macroeconomic developments. The time-value will turn against Brent in the near term for extension below $50 into $40, before sharp bounce back into $55-65. With this near-term outlook, it is not bad for fleet-footed traders to be "short Brent" at $52-55 for $40-43, against long-term strategic hedge demand at $40-50. All combined, there would be good two-way interest at $40-50 and more of speculative short at $50-55.

Gold derives support from mixed cues and volatile sentiment

Gold is in back-and-forth mode at set focus zone of 1170/1185-1220/1235; the recovery from below $1135 into $1220-1235 is largely from shift of appetite from hot-to-hold valuation in equity (and bonds) into relatively cheap-to-acquire precious metals. The sharp rally in global equity (and Bonds) since mid October 2014 against depreciation in Gold value from over $1250 to below $1135 is the trigger for shift of appetite to Gold (as alternate to cash in ZIRP & NIRP conditions). What next? The long term trend is down into $950-1000, not supported by demand-supply dynamics and currency risk from USD strength. The near term relief from $1135 into 1235-1260 (best case not beyond 1310) is seen as temporary; it is matter of time before build-up of appetite shift back to equity and debt. All combined, recovery from below $1135 into/over $1235-1260 is default by design, as alternate to equity or debt or cash. For now, retain focus at 1180/1195-1245/1260 with bias into higher end. It is good to play end-to-end and prepare for reinstate of "short-Gold" book (post strategic exit below $1135) at 1245-1260 retaining appetite for 1285-1300 for target below 1130-1135 and for extension into $950-1000 in the second half of 2015.

Moses Harding