Levels to watch: gold, silver and crude

Global uncertainty drives investors into safe havens. 

Gold bars
Source: Bloomberg

Gold remains supported as uncertainty swells

Despite a fall in US consumer price index (CPI) data, released on Friday, gold prices have continued to be supported higher, albeit coming off their recent high of $1,282 (16 January). Levels are currently trading at $1,276. Driving support for the precious metal continues to be uncertainty surrounding possible policy changes across major central banks.

Gold’s recent high of $1,282 coincided with an oversold reading in its relative strength index indicator, and has since resulted in a pullback during the London open session, which could see a re-testing of previous downside support at $1,270 before resuming a bullish trend targeting a fresh high of $1,293. However, should support fail to hold, the next clear downside level is likely to be seen at gold’s 50-hour moving average, currently trading at $1,264.

Risk-on markets favour silver

Silver prices spiked higher on Friday posting a high of $17.97 before settling at its current level of $17.68, as markets move into safer assets after the Swiss national bank unpegged its currency from the euro last Thursday. This has served to heighten speculation over a possible implementation of quantitative easing from the European Central Bank.

Silver prices are currently consolidating around a key level of topside resistance at $17.70, which if held could well see a re-testing of its 50-hour moving average, currently placed at $17.26. However, should a pullback from an oversold reading spark a resumption of the bullish trend, a re-testing of the previous high of $17.97 could be brought into play.

Brent mixed as fundamentals remain unchanged

Brent prices are currently trading at $49.53, down 0.80% on Monday at the London open session and with no signs of a rebalancing in the ongoing oversupply issues. This is just as well as quarterly earnings from major oil and gas producers this week, which on the back of a 60% fall in oil prices is unlikely to make for positive reading, is likely to add to Brent’s recent woes. Also hanging over oil prices is the possibility of monetary easing from the ECB, which if seen is likely to see a move higher in the value of the US dollar, thus add further pressure on oil prices.

Immediate downside support in Brent is currently being seen at $49.16, which has already held firm on two occasions, suggesting a possible move higher could be seen with upside targets of $51.33 brought into play. However, capping any further upside in Brent is a contractionary reading of 48 in RSI, as well as a fall below its 200-hour moving average ($49.61). This could result in a re-testing of downside support at $49.16. A break below this could bring $48.19 into play.

WTI remains supported off the lows

WTI prices are trading at $48.44, down 0.81% on Monday having tested the 200-hour moving average at $51.28 (15 January). Prices touched $49.39 during overnight trading on Monday, which is likely to continue to act as topside resistance. If held they could see a re-testing of its 100-hour moving average at $47.53. However, with a bullish RSI reading of 52, it’s likely that yet another re-testing of topside support could be seen, which if broken is likely to bring the 200-hour moving average of $50.33 into play. 

The information 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 Bank S.A. 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 and as such is considered to be a marketing communication.