Gold is battered and bruised after breaching multiple technical levels. Crude oil is not far from the midpoint of a 10-month range; further losses could lead to an attractive buying opportunity.
Gold Breaks Down to New Lows
Gold $1,163.40 +$1.80 +0.13%
Commentary: Gold was slammed on Tuesday, losing $21.95, or 1.85%, as multiple technical levels were breached. Gold ETF holdings held steady, but they remain notably below the record levels of last week. Clearly, the lack of bearish economic news flow is taking its toll on the safe haven metal. With the ECB government bond buying program having done a good job in taming sovereign debt yields for now, the impetus to buy gold has substantially diminished. We would avoid the metal until signs of stabilization emerge.
Technical Outlook: Directional momentum seems to have finally returned as prices took out support marked by a rising trend line established from the swing bottom in early February and slipped below the $1,170.00 figure. From here, sellers face the next downside boundary at $1,151.85.
Silver $17.66 +$0.03 +0.18%
Commentary: After outperforming gold for a couple days, silver underperformed on Tuesday, losing nearly 3% of its value. We have said repeatedly that directionally, silver will take its cues from gold. There may be minor fluctuations in the relationship between the metals, but the bigger picture is that silver and gold are tied at the hip and will remain so for the foreseeable future.
Technical Outlook: Prices continue to consolidate within a descending triangle chart formation above support at $17.45. This setup is typically a continuation pattern, hinting further gains ahead. That said, it also carries a negative connotation and may hint at an emerging bearish bias. A break below support exposes at the $17.00 figure, while a rebound sees initial resistance at $18.58.
Crude Oil Falters Under $80
Crude Oil (WTI) $77.09 -$0.41 -0.53%
Commentary: Crude oil shed $1.48, or 1.87% on Tuesday, as prices failed to breach the psychological $80 level. Little has changed with regard to the crude oil outlook. Prices are above the midpoint of the 10-month range, which lies near $75.50. We would look for opportunities to buy at or under that level and sell near $80 or above. In the medium term, oil should eventually break out toward $90, but the fundamentals are not in place yet for that to happen. Wednesday we get the EIA inventory report. The API survey was again bearish (Crude oil +3084K, Gasoline +877K, Distillate +407K). If the EIA numbers come in similarly bearish, a buying opportunity may emerge.
Technical Outlook: Prices have turned lower having tested resistance at $79.38, the June swing top. Continued selling targets the bottom of a rising channel established since May near the $75 figure.
Written by Ilya Spivak, DailyFX Currency Strategist, and Sumit Roy, DailyFX Research
