Levels to watch: gold, silver and crude

Oil bounces from support to bring a short-term bullish outlook.

An oil refinery
Source: Bloomberg

Gold enters short-term consolidation mode

Following yesterday’s strong selloff, gold is now consolidating with marginal intraday moves higher overnight. Coming off the back of a move from the top of the $1224-$1178 range that has dominated the past two months, I do expect us to be moving towards the $1178 mark in the near future, and thus any pullback is likely to be a short-term phenomenon. I remain bearish and await the break below $1186 as the cue for gold to return to $1178.

Silver consolidation likely to lead to further losses

Silver has been largely consolidating in the past 24 hours. This follows a strong round of selling last week, which leads me to believe we could see a return to the descending trendline dating back to July 2014. Currently that support is at $16.50, yet as time goes on it will fall accordingly. Consolidation is likely to persist prior to a move lower and thus I am bearish, yet will wait for a better price around $16.82 which would be likely to occur should this consolidation continue.

Brent begins to rise from bottom of falling wedge formation

Yesterday saw the fall in Brent I was hoping for and with it, we created yet another lower low. Despite attempting to break lower from this falling wedge formation, the four-hour candle closed above the trendline and subsequent overnight price action also respected it. This points to a likely continuation of the pattern and thus I expect to see strength come back into the price of Brent, pushing it back towards the $65-$66 area. Ultimately I remain bearish and will hope to see a proper breakdown in the price soon which would necessitate a move below this current wedge and an increase in volatility.

WTI respects channel and begins to rise

In much the same manners as seen in Brent, WTI bounced from the lower end of its descending channel formation and we have seen two strong bull candles since. The flatlining MACD histogram points to a likely return in bullish sentiment and therefore I expect to see a move back towards the upper end of the channel, around $60.50 to $60.00 before the bears come back in. I remain bearish in the medium term and think we will return to $53-55 in June.

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.