Levels to watch: gold, silver and crude

Precious metals consolidate, while the crude spike on Friday brings us to crucial resistance levels.

Gold mining
Source: Bloomberg

Gold set to push higher
Gold continues to consolidate this morning following the bounce from $1178 that we were looking for last week. The range $1178-$1224 will continue to be the dominant factor driving price action as we go forward. As such, I expect to see a bullish tone come in to play this week to move back towards $1224.

Weakness this morning is likely to be short-lived and $1185 support is likely to be enough to send the price of gold higher. Much like silver, I do expect the current price action to simply consolidate ahead of a spike higher. The tightened bollinger bands provide exactly that same indication, as this ‘squeeze’ is the type of thing we often see prior to a big spike in volatility.

Silver looks to move back up
Silver has once again returned to the descending trendline which previously provided the upper boundary of an ascending triangle. This would be a great technical move if we break higher and I do expect this to happen in the near future.

The existence of the 50-day simple moving average around the same levels provides greater confidence that we will see the support hold for a spike higher. As such, I am bullish for a move back towards $17.80 and on to $18.50. This would be invalidated with a daily close back into the triangle formation.

Brent crude in a period of consolidation
The spike on Friday in Brent crude brought us back into the falling wedge formation that was in play throughout the majority of May. Currently we are seeing intraday consolidation, which is a little bit of a worry as I would have liked to see a swift move lower upon regaining so much ground.

However, lower highs and lows remain, which means that I continue to be bearish for another leg lower. That said, with the May sell off having bounced higher from a crucial 50% retracement of the 17 March low to 6 May high, there is a possibility that the retracement lower could be finished. As such, I am bearish whilst price is below $66.40, yet any move above there would create a more bullish environment.

WTI favours the bears
US light crude has similarly bounced back towards trendline resistance on Friday, with price perfectly stopping on the descending May trendline. While the daily chart provides a morning star reversal pattern, I remain bearish unless we manage to break higher from this channel and create a new higher high.

Thus I expect sellers to return at these current levels, for a move back towards $58. However, a move above $61 would begin to look like the correction may be over.

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