Levels to watch: gold, silver and crude

US dollar strength and year-end profit taking leave commodity markets mixed.

Silver bars
Source: Bloomberg

Strong US dollar start continues to scupper gold prices

A strong opening to the week from the US dollar has seen gold prices reverse through a key level of $1,215, which previously acted as medium-term support. However, should a close be seen below said level then the next clear area of downside resistance will be seen at around $1,207.

Later on Monday we see the release of US industrial production data, which is expected to rebound to 0.7% from its previous level of -0.2% month-on-month, which if achieved will likely lead to further weakness in gold prices.

Silver breaks out of consolidation

Silver prices have broken to the downside through a week-long consolidation pattern taking out the $16.91 level. This is now likely to become support to further downside re-testing the lower immediate risk range, which currently resides at $16.74.

Brent targets a reversal

Brent prices have rallied off its December 14 low of $60.61 to its current level of $63.12, but before any talk of a reversal can begin it will need to see a close above a topside immediate risk range of $63.53.

However, it’s more than likely a result of short-covering heading into the year-end with traders favouring to take profits off the table following such an overwhelming move lower from its June high of $115.70.

Profit-taking drives WTI rally

WTI prices have also seen a short-term rally, but to a lesser degree than Brent, currently trading at $58.47 up from its short-term low of $59.89. Again, similarly to Brent, profit-taking is likely to be the driver of this short-term rally and with the topside resistance at $59.89 there’s still a way to go before a longer-term reversal pattern can be called.

Should markets fail to breach the $59.89 level then a resumption of the previous bearish trend could re-emerge with the downside target of $53.96 being the next clear area of resistance. 

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