Article / 20 July 2016 at 15:22 GMT

Gold tops out, oil consolidates - a look at the charts

Technical Analyst / FuturesTechs
United Kingdom
  • Gold price breaks lower
  • Oil consolidation is taking longer than expected
  • Farm commodities are sitting on key support levels

Oil platform
 It's been a damp few weeks for Brent crude oil. Photo: iStock

By Clive Lambert

I'll be away for a couple of weeks as of Friday, so I'll leave you with a "bigger picture" look at the major asset classes and markets, and what the charts suggest for the coming weeks. 

Today let's start with commodity markets.

Gold (August '16) has topped out for now, hitting $1,377/oz on July 9 and failing again just shy of that a few days later. I was giving the bulls the benefit of the doubt right up until today, as a strong area of support was identified around $1,227-29, and forays below that area had been attracting buyers. "Had" being the operative word. Today gold has broken lower, and it feels a bit more like the real deal this time, with little responsive buying seen as I write. 

There is another strong area of support below here at $1,308/oz. The chart suggests further weakness, targeting $1,287 and $1,268 if we fail to hold above $1,308.

If the bulls want to turn this around, their job — apart from making sure gold doesn't break $1,308/oz — is to get it back above $1,338-40. Then we would have a signal to head back to $1,377/oz.

Gold daily candlestick chart

Gold Daily
Source: CQG Inc.

Gold weekly barchart

Gold Weekly
Source: CQG Inc.

Crude oil slips

Brent crude oil (front month is currently Sep '16) has had a damp few weeks — months, in fact. It topped out at $52.86/barrel in early June and has been tracking back to $45.90/b ever since.

Throughout this time, I've considered this to be a counter-trend consolidation, and have been waiting for the bulls to return to the fray. They haven't yet. But the daily chart below shows what I'm thinking (I hope). It looks like the Brent price has been forming a "wedge" over the past few weeks, and if/when it breaks the top line of that wedge, the uptrend that's existed since the bottom in January can resume, and we can look for a fresh test of $51.50 and $52.86/b.

Below $45.90/b, the next strong support is $45.50, then $43.00.

Brent crude oil daily candlestick chart

Brent Crude Daily
 Source: CQG Inc.

Brent crude oil weekly barchart

Brent Weekly
Source: CQG Inc.

Some other highlights worth flagging in the commodity space are:

Corn has seen a big selloff in recent weeks, but is now sitting just above some really strong support at 340-350 US cents/bushel.

Ditto wheat and the 415-30 USc/bushel area.

Soybeans have given back half of the gains seen earlier in the year (and it was a pretty big move) and currently sit above support at 1,018 USc/bushel. Below here, the target is 978, then 926. The bulls' job right now is to get us back above 1,045 USc and 1,057 to target 1,084, then 1,123.

Copper is trying to haul itself off the lows, but needs to clear $232.50/lb to give the bulls something solid to cheer about and back. $250 and $256 are the next upside targets if this can be achieved. Platinum and palladium are leading the way on this recovery trade.

Finally, silver has had an interesting and, at times, volatile few months. I'm pretty sure I've posted a few (bullish) articles on TradingFloor over the course of the year, as I've been on the bull side of this for a while now. Things got a bit "frothy" recently, however, so a pullback was inevitable. I want to see pullbacks holding $19.20/oz or, at worst, $18.32-37 to keep the "bigger picture" bull story alive.

I'll take a look at equities tomorrow, and forex on Friday. 

– Edited by D. Deacon

Clive Lambert is chief technical analyst at FuturesTechs


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