Levels to watch: gold, silver and crude

Gold and silver break below major support levels to bring about a bearish outlook.

Oil barrels
Source: Bloomberg

Gold breaks lower and finds new resistance
Yesterday saw gold close below $1178 for the first time in two and a half months. The daily close is the first significant signal that we are set to move lower. The second being a retest of $1178 as a new resistance level and has happened overnight on the intraday markets.

As such, I expect to see an extension lower, with the first point of call at $1170. Below this, the next support level to watch out for comes in at $1142. While price remains below $1178, I think $1142 seems likely.

Silver breaks back into triangle with $16 in sight
Silver has also broken down from its recent support level, moving back into the triangle formation that was in play throughout the first five months of the year. As such, I do expect any further movement lower to be capped by the ascending trendline that forms the lower end of the triangle (currently $15.94).

At the moment we are seeing intraday consolidation around $16.14, but this appears to be a flag formation and as such will point towards another leg lower. Thus a move down towards the $16 level seem highly likely right now.

Brent continues to break down
Brent crude has been pushing lower throughout the second-half the week and today is no exception to that. The 50% retracement, $61.14, which was the source of recent strength is back in sight and a move below this level would be highly bearish for the medium-term outlook.

Today sees OPEC announce its latest production plans and I believe this will be a chance for it to continue its push for lower prices by keeping output high. Its plan to push producers out the market was never a short-term measure and as such, it surely knows that prices will need to be depressed for some time yet.

WTI broadening formation points to further losses
US light crude has been falling strongly following the peak of $61.50 earlier in the week. The establishment of both higher highs and lower lowers points to a broadening formation and possible distribution top.

While further downside does seem likely enough, it is likely that support would come back into play around $56.92 – the 50-day simple moving average – or $56.51, the May low. The MACD histogram appears to be rounding off in a bullish manner and thus there is likely to be some form of move higher in the near future. Overall I remain bearish though and expect to see the creation of a new lower high should we see any short-term recovery.

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