Levels to watch: gold, silver and crude

Gold and silver selling off as range continues to dominate.

Silver bars
Source: Bloomberg

Gold selloff continues
Gold has seen the bears come back to the fore this morning, as the consolidation seen in the backend of last week is finally overcome. The break below $1201 was the spark needed to see gold move lower. Now this has happened, we are looking at any move higher to be capped by the $1201 resistance.

Ultimately we remain within the sideways range that has dominated the past two months, and thus I expect to see a return to $1178 in the near future. That being said, markets rarely move in a straight line and I would expect to see some form of consolidation or retracement before that. Hence any move to $1201 would be likely to be sold into.

Silver pullback continues following breakout
The continued pullback in gold this morning has typically seen a similar move in silver, with a break lower from the recent period of consolidation. Given that the bullish outlook in silver has been provided by the breakout from a triangle formation, a move back to the upper threshold of this formation would provide a great textbook point of likely reversal.

With that in mind, I expect us to see a move towards that descending trendline in the near future – currently $16.52 – for another push higher. Hopefully that will coincide with a bounce from $1178 in gold.

Brent crude looking to break lower
The upside seen towards the backend of last week seems to be over, with Brent crude now heading lower. I continue to remain bearish and as such I am looking to see a break below the near-term support at $64.70, followed by a fall towards $64.00. Price action over the past three weeks have created a falling wedge formation and any move lower than $64.00 could see a bounce owing to that formation.

However, I do expect us to see more substantial losses over the medium-term and therefore I do expect to see us break towards the downside from this pattern once the time comes.

WTI consolidating
Friday saw US light sell off from the highs of the descending channel that has been in play throughout May, which brought with it a renewed bearish outlook. However, we haven’t seen as much of a sharp selloff this time and price is consolidating around the middle of this sloped range.

Therefore whilst I do remain bearish, I am aware that we could see further consolidation, or even a return to the upper levels of the channel like we saw back on 15-18 May.

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