Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Gold Commitments of Traders and More - 1st May 16
The Magic of Gold Ratio Charts - 1st May 16
Consensus Forming: China Heading Back Into Financial Crisis - 30th Apr 16
The Next Technical Price Targets for Gold & Silver - 30th Apr 16
Stock Market Downtrend Should be Underway - 30th Apr 16
Gold And Silver – A Clarion Alarm Call For All Paper Assets - 30th Apr 16
US Economic Statistics LIES, LIES AND OMG, MORE LIES - 30th Apr 16
Stock Market Strong Elliott Wave Relationship is Developing - 29th Apr 16
Fed's Kaplan: Brexit to Factor in US June Interest Rate Decision - 29th Apr 16
Silver Miners Strong in Grim Q4 - 29th Apr 16
Is Silver a better bet than Gold in the Near Future? - 29th Apr 16
How to Use the CoT Report in Gold Investing? - 29th Apr 16
Sri Lanka is Intriguing: Areas to Consider for Value Investing - 29th Apr 16
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards - 29th Apr 16
Are We or Are We Not in a New Gold Bull Market? - 29th Apr 16
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16
Gold Price Target is $3,000 and Silver is $75 per Ounce - 25th Apr 16
Parameters for a Stock Market Sell Signal-in-the-making - 25th Apr 16
Stock Market Dangerous Divergence - 25th Apr 16
Gold Miners Nub is the Sweat of the Sun - 24th Apr 16
US Dollar Price Forecast - 24th Apr 16
Stock Market Upside Objective Reached - 24th Apr 16
Why Leftist Greeks have more reasons than Liberals to favour Entrepreneurship and Support Entrepreneurs - 24th Apr 16
The Dow Jones is a Catalyst for Misplaced Stock Market Optimism - 24th Apr 16
Why Russia Harasses U.S. Aircraft and Ships - 24th Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

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