Levels to watch: gold, silver and crude

Commodities to resume their trends following a short-term correction.

Oil plant
Source: Bloomberg

Gold trading around the bottom end of range
Gold weakness has brought us back to the lower spectrum of the range that has been in play over the past two months. That range has seen reliable buying and selling opportunities for many, with the buyers largely coming back in around $1178, giving way to the sellers around $1224.

Wednesday’s doji candle was followed by a spinning-top yesterday, and points to exactly the kind of indecision I would hope for around the bottoms and tops of this range.

With that in mind, I am bullish for a move back towards the $1224 area. A turning stochastic and MACD histogram provide yet more bullish signs and give me confidence that we will see the bulls return as next week progresses.

Silver hits trendline and begins to turn
The recent selloff in silver has brought it back towards the descending trendline dating back to July 2014. The simultaneous moves that I have been looking for in gold and silver have both fulfilled the first half of the process, with a selloff having brought both back to the crucial turning points.

Now I am hoping to see a bounce higher, but first I need to see an intraday (one- or four-hour charts) close above $16.78, which represents a descending trendline and 4 May swing high. Above that we have key support at $16.88 and that would be a big bullish signal for me.

I believe we will see a strong move higher over the coming week and should we see that initial move above $16.88, I am looking for $17.35 and $17.78 to be regained before a further move higher.

Brent resurgence approaching trendline resistance
Wednesday’s breakdown from the falling wedge that was in play throughout the majority of May has given way to a short period of respite for Brent crude. With a move higher, I expect the lower boundary of the wedge to provide new resistance and thus $63.50 is a major point of resistance to be watching for as a possible point to reversal to continue the selling.

One word of warning is the recent selloff seen throughout May has now brought us to the 50% retracement of the mid-March to early-May bull run. Thus there is a possibility that buyers could come back in at that price. As such, I am bearish at $63.50, yet any convincing move back into the wedge would make me expect a bounce higher in accordance with the formation.

WTI running into moving average resistance following bounce
In a similar manner to Brent, US light crude has bounced higher following the channel breakout that we saw on Wednesday. However, this move is likely to be limited in my opinion, due to my bearish overall outlook.

The 200-period simple moving average (four-hour chart) has been providing strong resistance and this could be the spark needed to send the price lower. With that in mind, I expect to see prices move back towards new May lows below $56.50 as long as the 200-SMA holds. My outlook remains bearish and despite having already seen prices come off significantly, I can see further losses in the near future.

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.