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Levels to watch: gold, silver and crude

Commodity consolidation is the order of the day as a lack of substantial direction means many are in a ‘wait and see’ mode.

Oil barrels
Source: Bloomberg

Gold’s selloff brings bearish flag formation

The substantial sell off yesterday took back much of the gains in the middle of last week. With price consolidating, there is a high likeliness that we are going to bounce up, simply due to the fact that the current trend is towards higher highs and lows. However, with the current consolidation forming a flag rather than a more substantial bounce higher, there are also warning signs that further losses could be around the corner.

As such, I will await a break from this formation, with a break lower likely to point towards a move to $1178. Otherwise a move towards the upside could bring another major leg higher with initial resistance at $1192 for gold.

Gold chart

Silver fails to create new high and pulls back into triangle

Silver has pulled back following the attempt to create a new high yesterday. The inability to do so says a lot about the strength of any bullish momentum and makes it likely that we are going to trade in a low volatility and rangebound environment for some time yet. The ascending channel in play will be buy and sell triggers for many in the markets.

In particular, a move to $16 would be particularly likely to cause a bounce higher as it is not only a major handle, but also the meeting point of two notable trendlines. Therefore I am bullish for a move back towards the $16.30 region, yet could see us gain a better price in the short-term.

Silver chart

Sharp move lower in Brent is recovered yet points to further losses

Brent saw a sharp selloff yesterday, which was subsequently bought into for a short-term recovery. Resistance appears to be formed around the 20-period SMA and thus an intraday close above that would point towards a move back towards the upper end of this descending channel (around $64.00).

Regardless of whether we do see that short-term bounce or not, the trend is certainly towards further losses and as such, a move to $62 is likely this week.

Brent crude chart

WTI triangle shows lack of direction, for now

Recent tightening in price action for WTI has failed to create a new higher high, but with higher lows in place, there is a triangle to be watching for now. Early strength has faded from the upper end of the triangle and thus I expect to see the sellers dominate today’s session for a move back towards $59.50.

Ultimately the breakout from this triangle will determine direction, yet given the recent trend I would expect it to be a bullish resolution.

WTI chart

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