Levels to watch: gold, silver and crude

Precious metals attempt to claw back losses, while oil prices see much of February’s gains erased

Gold bars
Source: Bloomberg

Gold's resurgence could be short-lived

Gold appears to be attempting to claw back some of the losses seen since the January high of $1307. However, indecision seems to be dominating any bullish momentum, with Thursday posting a spinning top candle and today’s upside seemingly stunted by previous support turned resistance at $1164.

The ability to close above $1164 and $1175 will be key to determining whether we are set for a more protracted move higher. Unless that happens, I remain bearish and still expect us to see $1130 in the next week or so.

With the January high to 24 February low bringing a 23.6% retracement, a similar move off the more recent leg lower would bring resistance around $1165. Given that this lies between the $1164 and $1175 regions, I believe there should be sufficient resistance to push the price of gold lower yet.

Will strong start for silver fade?

Much like gold, silver has had a strong start to the week. However, the difference for silver is that we have seen it break above a key resistance point at $1572. This creation of a new higher high is the first sign of a reversal and therefore, I am watching the chart carefully today. Resistance provided by the upper Bollinger band has led to a sharp selloff and it will be crucial to see if the next low is set above $1552. Should that occur, it would point to a stronger move higher in the coming days and may also have implications for its highly correlated partner in crime, gold.

Like gold, I believe any strong move higher will be sold into and ultimately $1462 is the level I expect major questions will be asked regarding a potential reversal higher. However, this has the making of another move like that seen in late March, with moderate daily gains seen for a week following a strong selloff followed by the next leg higher. Thus I will be looking at any moves towards the $1609 region as an opportunity to get in at a better price.

Brent deteriorates further

Brent crude managed to break below the key support level of $5592 on Friday, bringing with it a renewed bearish outlook and instigation of the next leg lower. Support appears to have been found at $5280 and we are now consolidating once more. Any upside is expected to be capped by $5592 which now coincides with the 38.2% Fibonacci retracement at $5583.

I believe we have further to run on this move lower and it is just a case of finding those key resistance points as triggers for the selloff to resume.

WTI gap could form opportunity

WTI saw substantially more selling action than Brent on Friday, losing almost 5% to close at $4500. This is unlikely to be the last of the losses and today’s resurgence has already found resistance at $4477. The $4477mark represents the support level provided by Friday’s price action and following the substantial gap lower over the weekend, the fact that this gap has been closed means that we can now see that move lower continued.

Any close above $4477 on any high timeframe would bring the potential for a sharper correction higher, yet while the price remains below this level, I am bearish and expect us to see $4381 in the near future. 

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