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Gold and oil on the cusp of breaking out

The Gold price has hit its head on resistance numerous times this year – it appears increasingly keen to get moving! Over the past month, the precious metal has wound itself up like a coiled spring on the daily chart and is almost reaching a point of unravelling. The weekly chart shows key levels of $1367 and $1398 to beat to initiate real momentum, with the later price opening a move towards previous highs.

A look at Oil shows a similar scenario. Both Crude and Brent are trapped in ever tightening triangles on their daily charts, and nearing the tops of their weekly trend channels – but not for much longer, a decision will be made soon enough.

Yesterday, the American Petroleum Institute (API) reported a draw of 1.047 million barrels. Although in line with expectations, the lack of large inventory builds has been indicative of a tightening market.  It’s this time of year in the annual cycle that is subject to the biggest builds. All eyes will now be on the US Energy Information Administration’s (EIA) weekly petroleum report this afternoon. A decent draw on inventories could spark a strong rally exaggerated by any clear technical breakout.

Back to gold coloured gold, and I wonder what will be the trigger for it to burst its banks. Perhaps a failure of this equities recovery rally might be what it’s waiting for, or will it be Dollar weakness? The Dollar Index is hanging precariously at the moment too, and failure for it to cling on above 8800 will surely set all the commodities free.

Author: Stuart Langelaan

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