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Levels to watch: gold, silver and crude

The rout in commodity markets has paused for breath today, but there seems little chance that the coming week will provide much relief.

Gold bars
Source: Bloomberg

Commodities are hitting lows not seen in months, and in cases years, as the US dollar enjoys one of its best periods in a long time. The American currency clocked up nine weeks of gains (as of last Friday), pushing back to the highs of 2013.

The Federal Open Market Committee meeting this week will see no policy changes, but the wording of the accompanying statement, and Janet Yellen’s comments in the press conference, will be closely-watched for signs of a possible shift in sentiment.

Commodities have been very closely correlated (on a negative basis) with the US dollar in recent weeks, with investors shifting from the sector, resulting in a capitulation in commodity prices.

Gold could hit December 2013 lows

Having seen the metal slump through $1240, price watchers should shift their attention to $1226 and then $1220. A close below $1220 would perhaps seal gold’s fate and send it back towards the December 2013 low around $1190.

A bounce from here must close above $1240 once again, leading on to resistance around $1257.

Silver gains capped by 20-DMA

Having slipped below major support on the weekly chart, silver traders should keep an eye on $18.50, with additional support possible around $18.10.

Silver’s overbought status on the relative strength index has yet to be resolved, but any gains to the upside are likely to be capped by the 20-day moving average around $19.20.

The hourly chart shows silver fighting to break through the 50-hour MA, with $18.70 also acting as resistance as well.

Brent could fall to $96.60

Brent’s 2013 low around $97.40 is holding for now, but a close below this level would target $96.60 on the weekly chart, followed by the $95 area itself.

Recent performance in this asset has demonstrated how the 50-hour and 100-hour MAs have stunted progress to the upside, with short-term targets being 9820 and 9890.

Until the 200-hour MA is breached it seems difficult to think that this current bounce off $97 will be anything more than a short-term rise and an entry point for further moves to the downside.

WTI testing key support

US light crude is testing key support at $91.60 today, and a close below here opens the way to the $90 level and then onwards to $89.50.

The hourly chart shows potential support at $90.90 and then around $90.58, while any move to the upside must clear the 200-hour MA at $93.10. An attempt to do this last Friday was swiftly defeated around $93.50, providing another area of resistance.

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