Levels to watch: gold, silver and crude

The minor pullback in the dollar over the past couple of trading sessions may well have helped some of the commodity complex to catch a bounce from multi-year lows, but all things considered the respite could turn out to be brief. 

Silver bars
Source: Bloomberg

Slowing global growth and the expectation that Chinese Industrial Production numbers will be weaker tomorrow could well see the dollar benefit at the expense of oil and gold.

Brent sees positive divergence on RSI

Tomorrow’s crude oil inventory release takes on new importance this week as oil prices continue to plunge to four-year lows. OPEC convenes on November 27 so market participants will be very focused on whether production will be cut by the various members of the group. Until we get some clarity on this potential event, the oil market looks to continue lower.

The range over the past four trading sessions has seen the $84.50 level act as resistance while the lows of $81.20 found some buyers. The fact that oil prices are trading some 20% below the 200-day moving average, coupled with the positive divergence on the daily relative strength index, could suggest that this range may continue over the short-term. A break below the lows will target the $80/bbl marker – seen as something of a line in the sand for oil prices and oil company profitability.

Intraday, Brent’s attempts to push higher have failed at $82. Any break above this could see the price push back towards the 100-hour moving average at $82.80.

WTI finds resistance at $80

The West Texas Intermediate November contract is also finding the going tough on any attempts to break higher. Having fallen as low as $75.90 last week, this level will be in focus should tomorrow’s inventories data indicate supply gluts. The top of the recent range comes in at $80, and this level should and does present a very important resistance level.

Intraday, we are seeing WTI’s price put in a bottom around $76.50 and while hampered by the 50-H MA at $77.50, we may well see this support act as a target in the near-term. A breach (preferably on a daily basis) targets the recent lows.

Gold eyes November lows

Gold fans should be excited by the push above the 200-H MA, although $1170 is providing resistance for the time being. Oddly, the 50-H MA has swerved away from the 200-H MA so until there is a bullish crossover here some may wish to wait before going long. However, on the daily chart the bounce from oversold has now begun in earnest with $1180 as a first target before moving on to $1200. A move back below $1154 targets the November lows around $1130.

Silver could target $16.50

The $15.70 level has been set for now as major resistance for silver in the short-term, although buyers continue to step in around $15.50. The SMI is moving higher on a daily chart however, so a close above $15.70 would signal that a potential move to $16.15 is underway. Beyond that the target is still $16.50, at which point I expect the downtrend from July to kick in again. 

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