Technical analysis: key levels for gold and crude

Commodity prices have continued to turn lower, with gold breaking below a key support level and Brent approaching a critical level which could give way to another bout of selling.

mining figure
Source: Bloomberg

Gold could see 61.8% retracement as support

Gold has broken below the $1240 mark, bringing with it a heightened chance of further downside. Given that break, we are now looking at potential retracements of the wider move up from $1195.

With that in mind, the 61.8% retracement is coming into play as support, which has been respected so far this morning. The continued creation of lower highs and lower lows on an intraday basis will be our guide for whether further downside is around the corner.

For now that means that as long as price remains below the $1242 mark, further downside is expected.

Gold chart

Brent continues approach on major support level

Brent is continuing its decline, as we approach the all-important $49.92 support level. The channel that has been respected well over recent weeks remains in play. However, the fact that we have failed to rally back into the top end of that pattern in recent days tells us a lot about sentiment.

Ultimately it is all going to come down to how the market responds to the $49.92 level. A break below $49.92 would provide us with a strong selling signal for the medium and long term. However, given how important that level is, it is also a likely place for a potential bounce.

With that in mind, while the short-term trend is bearish, we need to see the reaction to the impending area of support to subsequently gauge which way things are going to turn for the coming days and weeks.

Brent chart

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.