Levels to watch: gold, silver and crude

The stronger dollar continues to put pressure on commodities, with little respite after heavy losses last week. 

A pretol pump
Source: Bloomberg

Gold could slip to $1140

Rebounds in gold have been short and not particularly sweet. We have seen the price move below $1160, pushing it further into oversold territory. Such oversold readings are usually a sign of an impending bounce, as was the case in June and November of last year, but with the US now more likely to raise rates in the middle of this year the macro-economic backdrop has shifted.

A daily close below $1160 targets the $1140 low from November, and with stochastics firmly bearish momentum may carry us to this target. The $1180 level is resistance on the upside, but the bulls have their work cut out for them to turn this one around at present.

$16 still resistance for silver

Bounces towards the 50-hour moving average have proven to be effective in pin-pointing entry areas for fresh selling, and with the hourly relative strength index and stochastics rallying silver bears may have another chance. Yesterday’s high at $16 is resistance in case the buying becomes heavier, while the $15.50/$15.60 zone is the support level to watch for silver.

Brent’s decline persists

The slow, gradual decline in Brent continues for yet another day. Support may be found around the 50-day moving average at $55.30, but a close below here would target the January lows below $50.

The four-hourly chart has an oversold reading on both the RSI and stochastics, so while the decline continues (and the drop below $58 reinforces this idea) sellers should perhaps wait for a bounce that will provide the needed entry point.

WTI could breakout

The 50-DMA is preventing further losses in US light crude for the time being, with $48.30 also likely to provide support in the near-term. The narrowing range in the price suggests a breakout is near, with the current boundaries lying at $49-$51. 

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.