Levels to watch: gold, silver and crude

Commodities are enjoying the Fed-inspired bounce, but will it last?

Silver bars
Source: Bloomberg

Will the gold spike last?

The jump higher in gold, spurred on by yesterday’s Federal Open Market Committee statement, brought brief respite for gold holders out there. However, with that move comes the question of whether it will simply make up a short-term retracement or signal the beginning of something bigger.

Yesterday’s move higher meant price action has now broken above the higher threshold of a descending channel that has been in play since 11 March. With the price finding resistance around $1179, it is now moving back to test that same descending trendline. Should support be provided around $1155, then it would be an indication that we could yet see further upside.

The main level of support I have been watching is around $1130, and thus I do expect us to see a reversal higher between the current $1163 and $1130. However, following yesterday’s shock I am awaiting a signal of whether we will continue lower or see a reversal around this mark. A break back below $1153 would give me confidence of a resumption lower, whereas a move above $1168 would likely mean a more bullish short-term outlook.

Silver stuck between support and resistance

Silver has often given us clues as to where gold will move in the near future, and the predicament both seem to find themselves in is clearer on the silver chart. Price action is currently stuck between key resistance at $1609 and support at $1580.

For this commodity a break higher would be more significant than that of gold because the $1609 level not only represents yesterday’s high, but also the February low, two-day simple moving average (SMA) and 23.6% retracement of the January high to March low. Thus it should take some serious momentum to take price above $1609, and that would give me significant reason to believe we are seeing a change in sentiment from that of the past two months.

However for now, I will stay with the trend and thus remain bearish unless the price moves above $1609 in a convincing manner. Near-term support comes in at $1580 and ultimately the 2015 low of $1529.

Brent upside under attack

The jump seen in Brent after yesterday’s Fed statement is similarly coming under pressure today, following the resistance found at $5663. Much like the other commodities, Brent is within a period of discovery, with markets watching to see if it creates a new higher low or can push back to the $5274 support level.

Should we see another leg higher, we would need to break above the 200-day SMA and 38.2% retracement at $5565. Much in the same way as I treat most charts, it will take a lot for me to say we are truly seeing a reversal and thus for the time being I will stay neutral in the short term with a bearish bias over the medium term.

WTI breaks key support at $4510

Similarly to Brent, there has been a significant amount of speculation regarding whether yesterday’s move higher will indicate something important or just a short-term retracement. Resistance at the 11 March low of $4730 should be broken for me to really get interested in any sort of bullish outlook in the short term.

The recent break below Tuesday’s swing high of $4500 is notable and makes me think that the market possibly still wants WTI to move lower. However, further support lies around the 100-hour SMA and 20-period SMA on the four-hour chart; both resting around $4457. Ultimately I am waiting for a break below $440 to continue my bearish outlook, while a move above $4730 would make me less skeptical of a reversal higher. 

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