Technical analysis: key levels for gold and crude

Gold is currently consolidating at an absolutely critical support level, while Brent looks set for a strong move lower following the end of its recent revival.

Oil refinery
Source: Bloomberg

Gold consolidates around critical support level

Gold rallied back into the $1229 resistance level overnight, with the market clearly taking a breather following a strong move lower into an absolutely critical area of support. This level is important as a break below $1214 would provide a completed double top formation on the daily chart. As such, we are looking for either a breakdown through that level to provide a renewed bearish signal, or else a rebound from support.

An hourly close above $1229 would point towards some form of retracement at least, with a break through $1255 needed to provide a more medium term bullish view. To the downside, we would need a four-hour close below $1214 to signal the likely beginning of another period of weakness for gold.

Gold price chart

Brent breakdown signals impending weakness

Brent followed up its channel breakdown with a move back below $48.56, thus bringing about a renewed bearish outlook. This tallies up with the longer term downtrend that has been in place over recent months.

With that in mind, the current rally is seen as a selling opportunity, where the market is expected to turn lower into a strong selling phase. The more this market rallies, the better it is for entries, as long as we do not see a break back through $50.00. 

Brent price chart

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.