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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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.