Levels to watch: gold, silver and crude

Japan’s GDP news is the big event of the day so far, and it has certainly made itself felt in the commodities market, which is seeing dramatic moves on the first day of the week.

A mining truck
Source: Bloomberg

Gold could test $1200

The relatively narrow trading range in gold came to an end on Friday, pushing the metal above $1180 for the first time since the end of October.

Having been given a dramatic shove higher at the end of last week we are now looking at a potential test of $1200 and even the 50-day moving average at $1210. The long-term trend is down, so although this oversold bounce may have some legs to it, potentially taking us as far as $1280, it would not affect the broader outlook here.

The daily relative strength index has pushed above 50 for the first time since the end of October, and hasn’t moved above 50 in an uptrend since the early days of that month, so the bullish scenario has precedence for the time being.

A close below $1180 would be needed to put the bearish outlook back in focus, with an initial target being $1154, followed on by the month low at $1140.

Silver could drop to $15.50

The metal has touched $16.50 this morning, close to the overriding downtrend from $21.50, and while the RSI has bounced higher it has dropped back below 50 for the time being. Gold buyers might be out in force but the silver fans are conspicuous by their absence.

Unless the downtrend is broken I expect the metal to continue its downward movement, towards the month lows of $15.50 and then $15. Only a close above $16.50 would give some strength to the bull case, with the 50-DMA at $17.20 being an initial target.

Brent moves lower again

The oversold bounce in the daily RSI lasted all of a single day in Brent. Now the commodity is moving lower once more, towards $77.40.

A weekly chart, although oversold itself, points us towards $75.60 and then $71.80, taking us further into the lows of 2010.

Turning to the hourly chart, we need to see the price reverse the downtrend from Friday’s highs and move above the 50-hour MA at $78.90, with an initial target of $80.40 and then the 13 November peak at $81.

WTI targets $73.25

Like Brent, US light is oversold on a weekly chart as well, but shows little sign of stopping its decline. A weekly close below $75 means that we are on target to $70.80 and then $67.20.

On the hourly chart the price has dropped back below the 50-hour MA and the intraday RSI continues to move lower. Thus the first target is the Friday low around $73.25, while any short term rally must clear $76 and then $76.70.

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