Levels to watch: gold, silver and crude

Markets await directional bias from the European Central Bank’s interest rate announcement as well as a possible quantitative easing policy.

Gold bars
Source: Bloomberg

Gold backs off its highs

Gold prices are trading at $1,293 – down 0.19% on the day ahead of what is set to be a volatile trading session because of the ECB’s interest rate announcement at 12:45 (London time), in which rates are expected to remain unchanged at 0.05%.

However, it is the following press conference (scheduled for 13:30) that is likely to dictate a directional bias as markets await confirmation that the central bank will begin a round of QE to the tune of €50 billion per month through to 2016.

Gold prices pulled back off its high of $1,305 on Wednesday, breaking through key support at the 50-hour moving average ($1,293) down to a low of $1,283 before receiving support from the 100-hour MA – currently trading at $1,282. This, coupled with confirmation from the ECB regarding its QE policy, could lead to a retest of the 200-hour MA.

Should Mario Draghi disappoint market expectations regarding QE, which have all but been priced in, then the downside level of $1,282 is likely to come under pressure. If this is broken then we may see $1,270 come into play.

Silver continues to outperform

Ahead of the ECB announcement silver prices have added 0.10% during today’s opening session in London – currently trading at $18.10 after failing to sustain a move above its 200-day moving average of $18.20. This is an area that will now likely act as key topside resistance which, coupled with an overbought signal of 71, could result in a retest of the previous level of support at $17.80. However, should markets be left underwhelmed by the ECB’s QE policy, then it is likely to spur some downside in silver prices. If a break through $17.80 is seen it could result in a move lower to $17.31.

Brent prices consolidate

Brent prices are likely to come under increased volatility today in anticipation of a possible round of monetary stimulus from the ECB. Historically this has resulted in a move higher in dollar-denominated assets as a protection against inflation – thus a move higher in Brent prices which have added 0.71% today and currently trading at $49.08. Recent price action has begun to consolidate within a tight range between $49.16 and $48.19. However, a bullish signal is beginning to emerge with prices breaking above a key resistance level at the 200-hour MA at $48.85. If this is held we could see a retest of the upper level of consolidation, and if broken could result in a move higher to $50.10.

Despite external factors such as possible QE from the ECB, supply/demand fundamentals in oil remain unbalanced, and this is likely to be the biggest factor weighing on prices. Should topside resistance hold then a retest of the lower-band of consolidation at $48.19 is likely to be seen. A move below that level could signal further declines, which would bring $47.80 into play.

WTI rallies off its recent lows

WTI prices are currently trading at $47.66, up 0.72% after touching a low of $46.41; however, a continued move higher is being capped by its 50-hour MA at $47.72. If this is broken we could see a move higher to $49.09. However, should topside resistance remain respected then the 100-hour MA is likely to come into the crosshairs, currently trading at $47.15. A break below could see $46.72 come into play. 

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