Levels to watch: gold, silver and crude

Commodities consolidate ahead of key economic announcements.

An oil pump
Source: Bloomberg

Gold channel intact

Gold remains within an overall downtrend that has been unbroken for two months now. The announcement of a potential shift in emphasis from Janet Yellen towards a less ‘patient’ Federal Reserve means we could see some volatility come back into what is currently quite a slow moving market.

A descending channel in play throughout the last week means that for now, price action is likely to remain constrained by an upper resistance level of $1156 and support at $1141. However, we will be looking for a breakout to gain direction for the medium term.

Bullish divergence within the stochastic oscillator points towards some underlying upside momentum, yet I remain hesitant until we reach the $1130 support level. I believe we will continue to trade lower, fundamentals allowing and continue to watch for the $1130 mark as a potential point where the question of a reversal should be asked.

Silver consolidates

Much like gold, silver has begun to see its trading range tighten and volatility fall. This is clearly evident from looking at the tightening Bollinger band and the lowest daily average true range since October 2014. However, I believe this is likely to be a period of relative calm before the next leg lower occurs.

The price remains well below the long-term moving averages and thus my bias remains to the downside. The resistance I am watching to hold is at $1578 while the near-term support appears to have formed around $1549. Watch for a break to bring some volatility back into silver.

Brent support unlikely to hold

The price of Brent has been consolidating for the early part of this week, with a descending triangle pattern providing a key support level that markets will be watching very closely. The deterioration of WTI means that Brent will likely follow its lead lower. Thus the break below $5272 is going to be my bearish trigger that I expect to produce the next round of selling.

The existence of the 61.8% Fibonacci retracement at $5272 adds further credence to the level and means that I am even more confident that markets will be watching it. A close below $5270 should therefore lead to the next leg lower, and I would only question my bearish view with a close above $5520.

WTI at crossroads

The price of WTI has fallen significantly more in the last month than Brent, creating new multi-year lows earlier this week. Thus we are now stuck within a more indecisive period, where a daily close below $4370 would bring big expectations of another sharp move lower. However, until that happens I could see further short-term upside as markets work out whether there are more losses to come or if $4300 is a bottom.  

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