Levels to watch: gold, silver and crude

Crude recovery in sight, while precious metals upside could be short lived.

Oil rig
Source: Bloomberg

Gold challenging support as bearish week looks increasingly likely
Resistance, as provided by the 20-week simple moving average (SMA), continued to hold yesterday, with gold price action providing an increasingly bearish element despite recent gains. The key support level of $1192 remains an important near-term hurdle which is in the process of being broken. An intraday break below this provides confidence that we are going to see a move lower this week, and makes a move down towards $1178 and $1142 more likely.

Silver continues to turn bearish with support challenged
Silver continues to sell off from the descending trendline dating back to July 2014. This morning is bringing more selling as price action is taking a bite at the support level of $1614. Alongside this, be aware of the 61.8% Fibonacci retracement around $1610 drawn from the March low ($1529) to high ($1741). Once we see a close below these levels, it provides a bearish signal that hints to further losses. Much like gold, I expect to see a strong move lower for silver this week. Further support levels to watch out for come at $1600, $1547 (double-top projection target) and $1529 (2015 low).

Brent crude finds support
Yesterday saw the intraday pullback that we were looking for, bringing the price of Brent crude back to the 50-hour SMA. This indicator appears to have provided yet another level of support in the recent gradual uptick, leading to a likely bullish day of trading from here on in. I am subsequently looking for a move higher with near-term resistance expected around $5974, $5980 and $6060.

That being said, the likeliness is that we will see a stronger move lower in the near future given the ascending channel we have seen over the last month. The bearish signal I am looking out for is a close below $5856 to heighten expectations of a selloff back towards $5600 levels.

WTI toying with crucial resistance zone
WTI continues to make tentative gains today as the price remains below the key resistance level around $5439. The potential creation of a bullish double-bottom formation means we should see a move above that key resistance point. This means there is likely to be a decent amount of people betting that there may be little left in this recent move higher. I remain bearish unless price does manage to break above $5439. However, the real signal that we are going to be moving into another bearish phase would be a close below $5000 given that it provides a key whole number and the swing low from 9 April.

Short-term traders may wish to play an intraday up towards the $5439 level as I could foresee some strength for the day. That said, my overriding feeling is that selling will enter the market once more in the very 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.