CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Levels to watch: gold, silver and crude

Consolidation reigns following a strong move higher in commodities.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Gold bars
Source: Bloomberg

Gold retracement likely to bring further gains

Yesterday saw a continuation higher in gold, building on the gains seen earlier in the week. The sharp upside followed by temporary intraday retracements is indicative of a strong breakout trend and given the move lower seen today, it is likely we are going to see the same again.

The retracement seen yesterday morning came back to just 23.6% of the Friday low to Monday high and given that shallow move, I would expect a deeper move lower today. The prime target for that next leg higher is at $1207, which represents a confluence of Monday’s peak, combined with the 50% retracement of yesterday’s move higher.

Ultimately I will only become more neutral should price fall below $1199 as this would create a new lower-low. That being said, with price now towards the top of the range seen in the past month, there is significant resistance around $1220-$1224. Thus I could see price begin to reverse around that area and only a close above $1224 would bring confidence of a move higher than that level.

Silver approaching resistance zone

Silver’s gains have pushed the price towards the upper section of the symmetrical triangle that has been in play over the past six months. The precious metal has sold off between the 200-day SMA and an ascending trendline (beginning in July 2014) on three occasions. Therefore any move into that zone (currently $16.74-$16.95) would bring warning signs of a potential reversal lower.

In the meantime, price is retracing and I am expecting to see a jump higher in the near future with support provided by $16.49 (Monday’s high).

Brent continues to retrace

Brent Crude is moving lower for a third consecutive day, retracing some of the gains seen this month. However, these have been somewhat minimal and a major challenge to this recent downside is likely to come at the 50-period (4 hour) SMA which held up prices last week.

I would need to see a move back below $61.40 for an indication of a potential longer reversal lower. Thus for the time being, I expect to see a bounce higher in the near future for a continuation of the medium-term uptrend.

WTI range holds for over two weeks

WTI has been trading within a sideways channel for over two weeks and there are few signs that we are about to see a breakout. Values are starting to tighten, forming a potential symmetrical triangle yet for the time being I expect to see continued moves between the $55.73 and $58.40 zones.

Thus the key is to play the intraday swings and for the moment, the sign is that we could see a move back to $56.10 in the near future for another move higher in the near future. 

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.