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Levels to watch: gold, silver and crude

Bullish precious metals could have limited time to run.

Mining trucks
Source: Bloomberg

Gold strengthens following trendline support
Gold continues to range within a descending channel, with Friday seeing price action touch a descending trendline from 14 April, before moving higher to create a hammer formation. The likeliness is we will see this consolidation continue for the time being. Thus, I am looking out for a move back to the upper levels, around $1208.

Near term resistance is provided by the 50-day simple moving average (SMA), which also represents the middle of the range. However, with previous price action failing to pay too much attention to this indicator, it is likely to be short term. This bullish outlook remains unless price moves below $1181 on intraday markets, which would then point to a move back towards the lower boundaries of the channel.

Silver spike brings mixed picture
Silver moved back to the upper boundary of the symmetrical triangle that has been in play since January. The issue here is whether we have seen enough upside to then warrant a move lower, or if the market needs to touch that trendline prior to the bears coming back in.

Near term support appears to be provided by the 100-day SMA, which could hold the key to whether any downside is going to persist. However, it would be a move below $16.27 which would be more important. This level represents both the 1 May resistance and 4 May support. Given that we remain above that level, higher highs and lows are still in play and thus I am tentatively bullish for a move back to $16.79. However, given yesterday’s strength and the proximity of the peak to the higher end of this triangle, this bias is not particularly strong.

Brent at crucial crossroads
Brent crude has recently sold off to pull the price out of the ascending wedge that has been in place throughout late April. Essentially this is a trendline break, which can often happen and doesn’t necessarily denote a market top. However, it is one of the first signs of a turning market and thus I am watching Brent closely for any further signs of weakness.

The price is currently caught between support (50 4-hour SMA) and resistance (50-day SMA), with price showing very little volatility either way. The succession of doji and spinning-top candles on the intraday chart points to indecision and thus a breakout from this phase will be crucial as a determinant of direction.

Given that the trend is for further strengthening, I am moderately bullish, yet a break below support, I would then look for a move to sub-$65.96. This would bring warning signs for the price of Brent.

WTI triangle points to intraday upside
WTI light is currently trading within a triangle formation following the upside breakout in late April of a similar pattern. On this occasion, the consolidation is likely to be shorter given the size of the triangle, yet this provides us with some likely trading parameters and points towards a move higher today, towards the $59.50 area. Given the uptrend in play over the last month, I expect a break higher in time.

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