Levels to watch: gold, silver and crude

There has been a turnaround in commodities after a failure to sustain a short-term rally.

Silver bars
Source: Bloomberg

Gold resilient in heavy commodity selling

The broad-based selling of commodities on Wednesday had a limited impact on gold, which lost 0.32% on the day after posting a double-top at $1,244.4. This led to a test of the key 200-day moving average at $1,244.8, but has since retreated to its current level of $1,228.

The biggest loser was copper, which is often interpreted as a red flag for the markets regarding a deflationary environment, and in turn is bearish for gold prices. However, currently trading at $1,228, price action is being supported by an intermediate area of support at $1,224. If this is held we may see a third attempt at rallying through $1,244 – a move supported by gold’s relative strength index at 60.6.

Should its intermediate downside of $1,224 fail, the next clear downside target could come into play at gold’s 200-period moving average at $1,218.

Silver prices targeting support

Silver also retested a previous high of $17.19, but only managed to reach a daily high of $17.08 before seeing a retracement back to its current level of $16.74. This is now likely to act as a key level of support. If price action breaks down through this level, the next level of support is seen in close proximity at the 100-period MA at $16.71. Should this support hold then the next clear topside target resides at the 50-period MA at $16.90.

Brent fails to sustain short-term rally

Despite the sharp move lower in copper prices, which are indicative of both deflation and slow global growth, Brent prices spiked higher during the US close session on Wednesday, posting a high of $50.36. It has since reversed back down to its current level of $48.65, still off the weekly lows of $46.40.

It remains to be seen whether the current pull-back is a result of profit-taking after such a sustained period of selling, or indeed if a bottom has been found. Downside support is likely to be seen at $48.19, and if held could then see another leg up to retest the $49.16 level.

WTI posts a higher-low

WTI prices are now trading at $47.36, down 3.33% after posting a high of $49.56 on Wednesday that resulted in an overbought reading of 73. Downside targets are currently priced at the 50-period MA at $46.69, and if taken out we could see another move lower to the weekly low of $44.35. However, should near-term support hold then a retest of the 100-period MA average of $47.91 is possible.

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