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Levels to watch: gold, silver and crude

The dollar bulls will have yet another reason to give thanks this week, as it seems apparent that the recent moves in the dollar were predicated on the basis that US GDP would not disappoint; this has been vindicated

Mining trucks
Source: Bloomberg

The annualised third-quarter number came in at 3.9% against an expectation of 3.3%. The fact that the print has exceeded the previous quarter is also good news for the ongoing US recovery.

This certainly tends to add fuel to the current dollar bull run, and has seen the dollar index rise to a level last seen in June 2010. In a world of diverging monetary policy and lack of inflationary pressures, the moves in the dollar would indicate that market participants are speculating that the Federal Reserve will be the first to tighten policy; but with the drop in commodity prices, this heightened belief that we are even close to normalisation could be misplaced for now.

Gold unable to stay above $1200

It should surprise nobody that being in a gold position ahead of US GDP can either make or break.

It would also seem that the better-than-expected number was only ever going to be a net positive for the dollar, and this, coupled with the inevitable but premature ‘the FOMC will hike interest rates’ argument, has sent gold prices swooning once again.

Gold has been unable to maintain a toehold above the $1200 area but seems to be well supported around $1190 in the short term, with the 200-hour MA bringing up the rear on any deviations below this level.

The price has managed to retrace 50% of the falls seen from the highs in October around $1255/oz, so it’s important to keep a close eye on the $1210 zone and 61% retracement if gold is to gain further ground.

The $1178 level has also provided a base for any recent declines so this would be the most significant level to watch – a close through here would ultimately break the overall support and set the price on a course back to the $1160 then $1130 levels.

Silver supported by $16

Where technicals are concerned, it’s interesting to note that the silver price has managed to break the downtrend resistance in place since the middle of July. Prices are also, for now, managing to stay abreast of the 200-period MA on the four-hour chart, indicating that decent support is being found at $16.50, which coincides with the 61.8% retracement from the October 28 highs to the recent lows found around $15.06.

Major support comes in at $16, and while the charts may have looked slightly overbought in the attempts to rise towards $17, we have seen prices hit the top of the bullish channel in place from the recent lows. The 50-hour MA is providing rising support, with the 100-hour coming in relatively closely below that. A rise through $16.91 is required if the silver price is to regain any of its recent poise.

Brent could challenge $81

The price of oil may be undergoing a bounce, but one would question the sustainability. The trend is definitely down and unless we see oil make a move through $83 and beyond, the inclination to sell the rallies remains. That being said, the Organisation of the Petroleum Exporting Countries(OPEC), is due to meet in Vienna this Thursday to agree a response to the collapse in oil prices since June. Several want to cut production, but Saudi Arabia seems to be rather reluctant in this regard. This is an important point and could well help support my ‘sell the rallies’ theme.

Shorter term, Brent has managed to push through all three major moving averages and could be on course to challenge $81/bbl – this was attempted in vain last week.

A successful move through this resistance could then go on towards $82.34/bbl.

Support at $79.30 and the convergence of the 200- and 100-period MAs should be watched. A failure to hold above this takes us back to $78.00 in the near term.

WTI eyes $78

Similar moves and trends can be found in the WTI contract, but the $78/bbl level remains the area to puncture. Above all three major MAs on the one-hour chart, support can be found at the 50-hour MA , at $76.30; below that buyers may find an opportunity at $75.50.

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