Levels to watch: gold, silver and crude

Bullish precious metals could have limited time to run.

Source: Bloomberg

Gold sells off and heads for crucial support level
Yesterday’s break above $1198 provided a bullish signal for gold given the creation of new highs. However, the retracement from that move has become significantly deeper than many expected and, as such, price has moved back to the crucial $1175 support level. A break below this will provide a new low and with it, would bring a bearish sentiment.

However, until that happens, consolidation seems to be the theme of the past month, with the range of $1177 to $12.00 containing the majority of the price action. For this reason, I am watching for a bounce higher from the lower end of the range, which would be negated by a move below $1175.

Silver sees bounce from lower boundary of triangle
The silver selloff from the upper levels of the current symmetrical triangle formation happened like clockwork, with the full move back down to $15.82 happening in a single day. However, with yesterday’s bounce we are now watching to see if further losses are to come or if that period of weakness is over already.

Given that we are in the middle of a range, any position taking is going to be highly speculative and will generally have a worse risk-to-reward profile. Thus I would be bullish around $15.66-$15.80 levels, and bearish around $16.70 to $16.83 levels. Meanwhile, we haven’t yet seen any intraday sign of a reversal and until that happens we are likely to see prices creep higher.

Brent continues to rise
The price of Brent crude continues to rise, with the black stuff having risen for a month and a half off the March low of $52.58. An uptrend is clearly in place, with higher highs and higher lows. Thus for the near-term, I would not be surprised to see this continue. However, the intraday price action shows an ascending wedge formation which is typically a bearish pattern during an uptrend. Concurrently, the MACD has been creating lower highs on both the signal line and the histogram, pointing to a bearish divergence with price. With that in mind, I am mindful that this recent bull run might be approaching the end and will be watching for a potential break lower.

In the short-term, low volatility points to indecision and I think we will retrace back to the 50-period (4-hour) simple moving average to then potentially move higher again.

WTI breakout out of consolidation phase
WTI light has managed to break out from the triangle formation that has held for around two weeks. It has crucially moved above the $58.81 resistance point to create a new 4 ½ month high. That provides a bullish outlook and with prices currently showing signs of either a short-term continuation pattern or the source of a retracement, I am watching out for any move back to $58.81 as a good buying opportunity should it hold up as support. However, this could simply be consolidation and thus should price break back above $59.90, it would likely bring another leg higher.

Otherwise, any move back to $58.81 could be seen as a good buying opportunity. That being said, with Brent looking like we could see some sort of larger correction at some point in the coming week or so, this bull run could have a limited amount of time to run.

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.