Levels to watch: gold, silver and crude

Commodities are plumbing fresh lows this morning, with it looking increasingly likely that the sector will record a fourth annual decline. The ‘curate’s egg’ that is the global economy continues to make it difficult for the sector to stage a full rebound.

Silver ingots
Source: Bloomberg

Although we mainly discuss energies and precious metals, the supply situation in hard and soft commodities also points to a bearish situation. Corn output is at a record high according to the US Department of Agriculture, while US crude production is expected to hit a 45-year high next year, using data provided by the Energy Information Administration.

Gold could target $1255

Gold has started firmly below yesterday’s close, with an intermediate target being yesterday’s low at $1244, and then the next level to watch at $1240.

A modest oversold reading suggests a bounce may be in the offing, with a first target being $1255, and then the $1270 area.

The 50-hour moving average has done well to cap gains, limiting any upside to the area around $1252.

Silver still likely to test $18.75

Although reading as oversold on the daily chart, silver still looks likely to test $18.75, the major support over the past year, with the 50-day moving average crossing below the 200-DMA becoming a certainty in the coming days.

Any drop through here targets the 2013 lows around $18.20, while any move higher must manage a close above $19.05.

An oversold reading on the intraday chart suggests another bounce, but the 100-hour MA should cap gains around the $19 area.

Brent support around $96.55

There has been little respite for oil despite news of Saudi Arabia’s cut in production during August.

Support may now be found around $96.55, the low from 2013, while any short-term bounce will likely run into resistance around $100. Any gain to the upside should continue to be capped by the 20-DMA around $101.60.

$91.55 upside target for WTI

WTI is now through its lows for the year and is on its way to $91. Beyond that there may be some support at $88.25, while $91.55 is the primary target on the upside. 

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.