Best of the Week
Most Popular
1.Persecution of the Jewish Race Continues, Israel's Dark DNA Secret Revealed - Nadeem_Walayat
2. Gold Price $10,000 Is it Possible? - Jason_Hamlin
3.Bitcoin Price Sign of Reversal? - Mike_McAra
4.U.S. Stock Market Analysis and Forecast - Gary Tanashian
5.Gutting the U.S. Armed Forces, Committing Economic Suicide, France Imploding - Ty_Andros
6.Gold And Silver Price Trend Change Developing, Just Not Confirmed - Michael_Noonan
7.Gold Price Bracing for a Short-Term Correction - Jim_Curry
8.Massive Gold and Silver Futures Buying - Zeal_LLC
9.Most Hated Stocks Bull Market! - Puru_Saxena
10.Silver Up 10.3% YTD - Outperformance To Continue - GoldCore
Last 5 days
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14
The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - 20th July 14
AUD NZD Taking The Forex Bull By The Horns - 20th July 14
US-backed Israeli Invasion of Gaza Unleashes Death and Destruction - 20th July 14
The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - 20th July 14
Stock Market in DANGER of Strangling the Bears to Death - 20th July 14
Sanctions and Airliners - What’s the U.S. Empire’s Agenda? - 19th July 14
Gold And Silver – BRICS And Germany Will Pave The Way - 19th July 14
Choppy Stock Market in Recent Weeks - 19th July 14
Is The Stocks Bull Market Over? - 19th July 14
Edward Snowden Towers Over His Enemies - 19th July 14
Will Gold Price Drag Down the Mining Stocks? - 18th July 14
Will Stock Market Investors Get Out In Time This Time? - 18th July 14
Stealth Tech Stocks Rally Catalysts - 18th July 14
Stock Market - Is It 1999 All Over Again? - 18th July 14
Bitcoin Price Medium-term Trend Being Tested - 18th July 14
Stock Market SPX Highs A Fed Illusion - 18th July 14
American Press Blames Russia for Downed Malaysia Flight MH17 - 18th July 14
Financial Market Forecasts Special Event - 18th July 14
U.S. Housing Buyers Fools Paradise. Lying Spanish Banks... - 18th July 14
U.S. Housing Market in Trouble Again - It’s 2009 All Over Again - 18th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

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.


© 2005-2014 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

Free Report - Financial Markets 2014