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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.

anonymous

Publication date : 2017-05-04T10:50:15+0100

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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

Gold chart

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

Brent chart

Brent chart

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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.

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