Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 15th May 17
Gold Stocks Poised to Soar Sharply Higher! - 15th May 17
This One Undiscovered Pot Stock Could Help Investors Cash In On The “Green Gold Rush” - 15th May 17
WIll Trump Tax Cuts Debt Binge Save Stock Market From Double Top Bear Plunge? - 15th May 17
Trump Rally or Geopolitical Meltdown: Currency Management for Dollar Risk - 15th May 17
A Shallow Stock Market Correction? - 15th May 17

Market Oracle FREE Newsletter

Trading Commodity Markets

Is Crude Oil Price Ready for Further Growth? What Impact on Gold?

Commodities / Commodities Trading Oct 07, 2013 - 06:04 PM GMT

By: Nadia_Simmons

Commodities

One of the main events of recent days was the first U.S. government shutdown in 17 years. Light crude dropped to a new monthly low at $101.05 on concerns that this event would reduce demand for black gold in the world's largest oil consumer market. In the previous week, the yellow metal also declined and dropped below $1,300 an ounce. Despite this declines, on Wednesday, both commodities rebounded sharply supported by a weaker U.S. dollar as commodities priced in the greenback became less expensive for holders of other currencies. Additionally, in the second half of the previous week we saw similar price action in both cases.


Taking the above into account, investors are probably wondering: what could happen if the recent positive divergences between both commodities remain in place? Can we find any guidance in the charts? Let's take a look at the charts below and try to find answer to this question. We'll start with the daily chart of crude oil (charts courtesy by http://stockcharts.com).

On the above chart, we see that the situation improved slightly in the previous week. Last Monday, crude oil dropped to a new monthly low of $101.05 per barrel. With this move the price of crude oil declined not only below the August low, but also below the 38.2% Fibonacci retracement level. Despite this drop, we saw a pullback, which erased most of the losses late in the day.

In the following days, we saw further improvements as oil bulls managed to hold this level. This positive event triggered another pullback, which pushed light crude to the previously-broken rising medium-term support line on Wednesday. Additionally, the price of light crude came back above the 38.2% Fibonacci retracement level and the breakdown below this level was invalidated. Although crude oil closed Wednesday almost at the rising medium-term support/resistance line, the buyers didn't have enough strength to break above this resistance until the end of the previous week.

Looking at the above chart, we see that crude oil remains in the declining trend channel. Therefore, if we see a breakout above the medium-term support/resistance line, we could see a move up to the declining short-term resistance line based on the Aug. 28 and Sept. 19 highs - currently close to the $106.4 level (marked with blue).

Please note that the nearest support is the September low and the 38.2% Fibonacci retracement level. If it is broken, the next one support zone will be slightly below $100 per barrel where the 50% Fibonacci retracement level intersects with the June high.

Once we know the current short-term outlook for crude oil, let's take a closer look at the chart below and check the link between crude oil and gold. Has it changed since our previous essay on oil and gold was published? Let's examine the daily chart.

Looking at the above chart, we see similar price action in both commodities at the beginning of the previous week. They declined on Monday, however, in the case of crude oil, the buyers managed to hold the September low in the following days, which resulted in a sharp pullback on Wednesday. Meanwhile, gold declined and reached its new lowest level since the August top. Despite this drop, the rest of the week looked similar for both commodities.

Summing up, looking at the relationship between crude oil and gold, we notice similar price action in both commodities in the previous week. Therefore, if this relationship remains in place, we could see some strength on a short-term basis in case of the yellow metal and crude oil. However, we should still keep in mind that the recent decline in crude oil is just slightly bigger than the previous ones and light crude remains above the 38.2% Fibonacci retracement level, which forms strong support. From this point of view, the uptrend is not threatened at the moment. At the same time, the downtrend in gold remains in place and the yellow metal remains below the declining resistance line, which has already successfully stopped buyers several times.

Thank you.

If you'd like to stay up-to-date with our latest free commentaries regarding gold, silver and related markets, please sign up today.

Nadia Simmons

Sunshine Profits‘ Contributing Author

Gold Trading Tools and Analysis - SunshineProfits.com

* * * * *

 

Disclaimer

All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’ reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife