Levels to watch: gold, silver and crude

Markets front-run the European Central Bank’s quantitative easing announcement, leaving commodities largely muted.

Silver bars
Source: Bloomberg

Gold move overdone

Gold prices are trading at $1,295.2, down 0.45% on Friday having touched a high of $1,307 on Thursday. This followed the release of the ECB’s quantitative easing policy of €1.2 trillion, introduced in order to spur inflation within the single currency union. Gold, as a natural hedge to inflation, came under increasing demand, but given that an expansionary monetary policy has been anticipated by the market for some time – which has already encouraged gold prices to add 10.88% year-to-date – the market move following the announcement was extreme than it might have been. The recent sustained move higher in gold has resulted in an overbought reading of 73 being posted, which suggests a possible pullback. This could see a re-test of $1,274, which if held could see a resumption of the previous bullish trend with upside targets placed at $1,302 and $1,339.

Silver targeting support for a move higher

Silver prices have given up 0.40% at the London open, which has seen silver prices fall from $18.47 to the current level of $18.24. This is currently being supported by its 50-day moving average trading at $18.21, which if broken will see a re-testing of its 100-day moving average, currently trading at $18.01. This move would be supported by a contractionary reading of 47 in its relative strength index. However, should current support hold then a re-testing of Thursday’s $18.47 will be brought back into play, with further upside targets placed at $18.65.

Brent prices break out of consolidation

Brent prices have taken out a previous topside band of resistance at $49.16, which if it turns to support could well see a move higher, with immediate targets placed at $50.06 and $51.47. A move supported by its 50-,100- and 200-hour moving averages, as well as an expansionary reading of 52 in its RSI. However, should downside support fail to hold, a move back into a tight band of consolidation is likely to be seen between $49.16 and $48.19.

WTI upside capped by 100-hour moving average

WTI prices are trading at $46.82, down 1.02% on the day. This is currently re-testing downside support at $46.72, an area which has held firm on four separate occasions. Should support be respected then a bounce higher is expected to target its 100-hour moving average, currently trading at $47.24, which if broken could see a further move higher to $49.39. However, given a reading of 45 in its RSI, momentum is favored to the downside, which if taking out support at $46.72 could lead to $44.35.

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