Gold drops, silver plummets, and oil crashes

Gold Technical analysis, overview, strategies, and levels

It was a tough week for gold prices, gapping higher at the start of the week on coronavirus concerns but plummeting as the week progressed, and on Friday breaking past the $1,600 level. The liquidation into cash to cover positions in equities and the unwinding of hedges have been listed as reasons, though what is clearer is that volatility conformist breakout strategies clearly outperformed, in line with its daily and weekly volatile overviews. Increased rate cut likelihoods out of the US Federal Reserve has meant that the US dollar should ideally weaken, but cash is also a factor to keep in mind should the economic situation worsen.

IG client^* and CoT sentiment for Gold

Retail long bias has surged from 60% to an extreme long 77%, still below that of larger speculative traders according to the latest CoT (Commitment of Traders) report whose bias is at a long 88% with long positions dropping by 19,010 lots and shorts down by 1,226 lots.

Gold chart with retail and institutional sentiment

Silver Technical analysis, overview, strategies, and levels

While gold prices dropped, silver’s took an even worse turn with a big drop on Friday taking its price below the last of its main daily moving averages (MA), and at its 200-week and 50-week MA’s. The gold/silver ratio has surged higher, as the precious metal of greater use for the industrial sector took a hit as economic woes rise. That has also meant that last week’s consolidatory technical overview has been swiftly undone, shifting to match that of its daily overview, volatile.

IG client^* and CoT sentiment for Silver

On the sentiment front, retail bias has risen further into extreme long levels and stands at 93%, while CoT speculative traders have reduced their heavy long bias in silver only slightly to 77% on an increase in silver short positions by 2,634 lots and a simultaneous reduction in long positions by 450 lots.

Silver chart with retail and institutional sentiment

Oil WTI Technical analysis, overview, strategies, and levels

It was a week full of losses for oil prices, as it failed to find support with its price crashing through its key support levels with ease and shifting its technical overview on the weekly to match that of its daily overview, volatile. The overall risk-related atmosphere with the coronavirus spreading and its dent on travel and manufacturing has been a big contribution, with weekend economic data out of China showing manufacturing and services PMIs (Purchasing Managers Index) contracting at a record pace with sub-50 readings of 35.7 and 29.6 respectively, and OPEC+ meetings later this week to see whether (or by how much) they’ll respond is no doubt another factor. The current OPEC+ agreement is in play until the end of March, whereby output was reduced by 1.7M barrels. The OPEC+ committee last month recommended a further cut of 600,000 barrels per day, but given where prices currently reside pressure is rising from OPEC members to push that figure higher. In oil data, last Friday’s Baker Hughes US oil rig count was down by one, but should the price plummet persist as those figures will likely get severely tested to see whether shale will survive in the current climate given rising corporate debt that with lower oil prices will become unsustainable to service.

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IG client^* and CoT sentiment for Oil WTI

The latest price moves have caused significant pain for both retail and larger speculative traders according to the latest CoT (Commitment of Traders) report, the former raising that bias 5% into extreme long territory and the latter raising it by 3% as although long positions dropped by 12,454 lots for crude oil, short positions dropped by a larger 31,156 lots.

Oil WTI chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am.

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