Technical analysis: key levels for gold and crude

Gold and Brent looks set for short-term downside, and the recent downside that we have seen looks likely to continue.

Gold could see further downside

Gold sold off nicely yesterday, as we continue to see it retrace off the back of a rally into $1357 resistance. This is expected to persist, with the market yet to retrace 50%. There is a strong chance we could see the price fall into the 61.8% region at $1328.

That being said, given the stretched nature of this market, there is also a chance we could see the price rally in the short term, which could provide a shorting opportunity, as long as we do not see a push back above $1349. However, this sell-off is seen as a short-term retracement, with a break higher expected in the medium term.

Brent showing signs of potential breakdown

Brent has reached the end of a rising wedge formation, with the price falling below the lower threshold of the pattern.

The somewhat half-hearted rebound we have been seeing in response to recent losses did provide a warning sign, and this wedge is now providing greater clues as to a potential impending sell-off. Greater confidence of such a sell-off would come with a break below the $64 mark.

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.

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