Levels to watch: gold, silver and crude

Gold and silver are witnessing a bounce from oversold levels, but oil remains under pressure as the clock ticks down to the Federal Open Market Committee statement tomorrow afternoon.

Gold bars
Source: Bloomberg

There has been some bargain hunting in the commodities sector leading to small rises in precious metals. However, the overall outlook is still bearish given that Chinese economic growth is expected to weaken, while the FOMC moves to a potentially more hawkish outlook that could give another boost to the US dollar.

Gold could challenge $1261

The metal has attempted to push back above $1240 this morning, but a close below this level still means that a drop back to $1200, and then $1191 is possible.

The daily relative strength index has clawed its way out of oversold territory, so if the price matches this move and then closes above $1240 we may be looking at an attempt to challenge $1253 and then $1261. However, it would be wise to watch the other momentum indicators such as moving average convergence/divergence, which have yet to indicate a turnaround is in progress.

As ever, the 20-day moving average around $1266 is likely to mark resistance.

Silver could breach the 100-hour MA

A trimming of short positions has seen silver rise slightly, but the descending trendline from $21.50 is still in force. Any move towards $18.90 should continue to encounter resistance. For now, yesterday’s lows around $18.55 mark support, and if this is broken then the $18.21 low from 2013 comes into play.

Encouragingly, the hourly chart shows a clearly rising RSI from the oversold state of 12 September, and the price is now fighting to break through the 100-hour moving average. A close above this level leads to another attempt to break the 200-hour MA around $18.93.

Brent held back by 50-hour MA

As noted yesterday, the $97.40 low continues to hold Brent, so we now look for a close above $98. Moves to the upside so far today have been held back by the 50-hour MA, repeating a pattern seen last week. Any close above here could first target the 100-hour MA at $98.47 and then the 200-hour around $99.80.

WTI targets $93.80

A steady bounce from the oversold levels of early yesterday has carried WTI back to the 200-hour MA around $92.90. Any break through here would clear the way to the 12 September high around $93.50, with further potential resistance around $93.80

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