Technical analysis: key levels for gold and crude

Oil sees brief respite from selling, while gold remains around a key support level as we watch for signs of the next move.

Gold bars stacked
Source: Bloomberg

Will gold bounce?

Gold has bounced from $1105 support despite a brief foray below this key level. The $1105 mark represents the September low and breakout point from the late July/early-August basing pattern. Thus a bounce is a possibility from this area. However, we have not seen any signal of a reversal as of yet, and thus the downtrend remains in play. A close back above $1111 would give confidence of a move higher, with resistance levels $1114 and $1122 key near-term levels. However, until we see that, the downtrend remains in play, with near-term support levels at $1105, $1103 and $1098.

US crude tracking SMA

The US light crude chart has clearly changed in sentiment since the break back below $48.02. The price is clearly finding resistance on the 50-period SMA (four hour), and this gradual retracement looks a lot like a bearish flag pattern. Ultimately, a break and close back below $45.68 would be the clearest signal of another leg lower. Should we see that happen, the next major support is at $45.43.

Brent consolidates after drop

Brent also sold off heavily this week, having closed back below $50.69 support. The bounce we are seeing comes off the $48.55 support level and has $49.01 resistance to contend with should the upside persist. With the MACD histogram and stochastic both turning upwards, there is a clear possibility of bullish momentum coming into play here, but given the flag in US crude, a breakout seems the safest bet. Thus a break back above $49.01 would point back towards $50.00 being key, whereas a break back below $48.55 would likely instigate further losses back down towards $47.70 support.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.