Levels to watch: gold, silver and crude

Hopes for a gold rally are fading fast, but oil prices seem ripe for a move higher, with US light crude leading the way.

A man walking by oil barrels

Gold remains in limbo

Gold’s $20 purgatory continues – stuck between $1200 and $1220 for yet another day, frustrating both sides of the trade. It has drifted through the November uptrend line, while a gradual decline in the daily relative strength index and other momentum indicators points to a lack of buying pressure.

As before, a close below $1200 would be the bearish signal many are waiting for, but this has yet to transpire. If it does, then we look to the 2015 low around $1180 and then to $1150.

A breakout must clear $1220, the major upside barrier. A bullish crossover of the 20- and 50-period exponential moving averages on the four-hour chart would be the needed signal for a rally, and this is perhaps the most helpful timeframe to watch at present.

Silver's bearish momentum returns

Two days ago we witnessed yet another test of the downtrend off the January highs and it seems silver has regained its bearish momentum as a result. The $16.50 level continues to act as resistance, along with the downtrend line, while the drop of the RSI back below its 10-day moving average points to the likelihood of another test of the $16 support zone.

The crossover of the 50-hour MA below its 200-hour counterpart confirms the bearish trend, although sellers may want to wait for the hourly SMI to push back towards overbought levels before diving in. Only a move through $16.60 negates the bearish outlook.

Brent's RSI waning

Brent finds itself again inside a narrowing wedge formation, as the bounce from the lows of Monday runs into the downtrend from Monday’s high. Rising support should enter around the $60 area, along with the 200-hour MA, but moves above $60.80 seem to be capped for now.

Even so, the zone from $62.50 to $63 seems to be the real problem for bulls – a breakout above here targets the 100-DMA at $66, but a declining daily RSI makes this a tall order.

WTI eyes $55 

WTI's bounce from the support zone between $48 and $49 has resulted in a potential bullish crossover on the four-hour chart, as the 20-period EMA crosses above its 50-period counterpart. The $51 area has proven to be resistance in recent days so a close above here on the four-hour chart would signal fresh momentum has been found.

Crossover watchers might beware however, since the stochastic momentum index on the same chart is at overbought levels. Should a crossover materialise then longs would perhaps be best served by waiting for the first pullback, perhaps back towards the $50 mark, before taking a position.

A bullish crossover on the daily SMI and a move above the 10-DMA for the RSI on the same timeframe suggests, however, that another try to break $55 is on the cards here. 

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