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Oil continues to fall thanks to a reduction in tensions surrounding Ukraine and Iraq, while industrial metals are suffering due to a drop in Chinese demand. Precious metals have lost their allure thanks to a rise in Treasury yields and a surging US dollar. All this is unlikely to change, leaving the sector facing major headwinds in the final quarter.
Gold eyes $1215
The new week dawns with gold opening below $1200 for the first time since December 2013. Support seems to have been found at $1180, the lows of that month, but upside resistance is likely to be found at $1198 and $1209.
Any break through these levels targets $1215 and then the 20-day moving average at $1221, but bounces from the oversold zone have previously been treated as selling opportunities rather than the start of sustained rallies. Any break below $1180 targets prices in the direction of $1155, levels last seen in mid-2010.
Silver RSI still oversold
Although rallying today, the $17.15 level should prove to be something of a hurdle for silver. Any close above here on a daily basis provides the opportunity for a challenge of $17.50. We have seen a steady move upwards in the relative strength index but it is still oversold, a testament to how far the selling went last week. If the price drops through today’s low then a run to $16.05 cannot be ruled out.
For over a week now the 100-hour moving average has provided chances for the sellers to step back, with the latest test coinciding with a move into overbought territory.
Brent could bounce to 20-DMA
If Brent closes up today it will be the first such event in a week. The slump last week carried the commodity firmly into oversold levels, which sets us up for a potential bounce that may go as far as the 20-DMA around $96.90. Any close above here would target the 50-DMA at $100.75, and would mark the first significant test of this indicator in the current downtrend.
The 2012 low continues to be the first primary area of possible support, around the $88.40 area.
WTI could struggle to rise above $94.30
The weekly closing lows of 2013 held last week in WTI, providing the foundation for a bounce. Any move higher will, however, find difficulty in extending gains above $94.30-$94.70. Any daily drop lower targets the April 2013 lows at $86.