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Tale of Two Legacy Assets, Gold Near Highs, Crude Near Lows; What are Chartists Looking at?




Feb 12, 2020

Gold prices are again halted around the resistance level of USD 1,600 per ounce in the wake of slight recovery across the global front, especially the improvement in manufacturing activities across China and the United States.

To Know More, Do Read: Gold takes a breather; Global Economy Bolsters and AUD Appreciates

However, bullish sentiments are currently prevailing across the precious metals enthusiasts, which is providing gold with a cushion, and the prices are again setting an up course.

XAU Daily Chart (Source: Thomson Reuters)

On the daily chart, gold prices are trading above the long-term and short-term pairs of the exponential moving average with a positive crossover between all the pairs. At present, gold prices are trading above the 200-day exponential moving average, which is at USD 1,465.99, and the short-term exponential moving averages such as 50-day, 21-day, and 9-day are trading above the 200-day exponential moving average, which further suggests that the bullish sentiments are prevailing in gold for quite some time now.

Recently, gold prices broke down of a triangle formation and slipped below the 21-day exponential moving average; however, the commodity took the support from 21-day EMA and re-testing the breakout levels.

Investors should monitor gold prices at the current movement, if gold remains unable to breach the resistance, which is now setting around the level of USD 1,570- USD, 1,580, it could prompt the short-term 9-day EMA to slip below the 21-day EMA, which would mark the onset of short-term price correction in gold; however, economic activities would also play-out a decisive role here, and primary trend seems to be bullish.

The close-to-close volume is taking a rebound quite often from lower levels, which coupled with a recovery in prices suggests that any price correction in gold is currently being considered as an opportunity to enter long in gold by market participants.

Key Takeaways

  • Gold Prices are trading above the pair of long-term (200 & 50) and short-term (21 & 9) exponential moving averages.
  • Gold is moving upward to retest the breakout level, which would now act as the resistance- set across the level of USD 1,570- USD 1,580.
  • The close-to-close volume is taking a rebound quite often from lower levels reflecting that price correction in gold is currently being seen as a chance to enter long by the market participants.

Trend Analysis and Future Expectations

XAU Daily Chart (Source: Thomson Reuters)

On applying the Ichimoku clouding technique on the daily chart, to identify the strength of the current trend, it could be seen that gold is trading above Span A (mean value of the conversion line and base line) with a positive cross between the conversion line (mean of 9 days high and low) and the base line (mean value of 26 days high and low), which reflects that the primary trend is bullish despite a short-term pullback in prices.

Furthermore, the spread between Span A and Span B (mean value of 52 days high and low) is increasing, which reflects that the present trend is strong. The 14-day Relative Strength Index, a leading indicator, is above its mean value and is retracing down, indicating a slight pullback; however, the positive cross above Span A coupled with above mean RSI could support the gold price ahead.

The sky blue cloud area would be the support for the gold going forward with the primary resistance level of USD 1,570- USD 1,580 and ultimately USD 1,600 per ounce.

Key Takeaways

  • Gold prices are above Span A with a positive cross between the conversion line and the base line, reflecting a strong bullish trend.
  • The spread between Span A and Span B is increasing, suggesting bulls are in momentum.
  • The 14-day RSI is above mean with a slight pullback, which coupled with a positive crossover and increasing spread between Span A and Span B indicates higher side probability of gold moving upside to test the resistance.

Fibonacci Projections (upside)

XAU Daily Chart (Source: Thomson Reuters)

While gold prices are in much momentum, other economy and consumption-driven commodities such as crude oil are facing downward pressure amid oversupplied conditions.

To Know More, Do Read: Crude Oil Under Supply Glut; A Speculative Ray of Hope for The Oil Market

LCO Daily Chart (Source: Thomson Reuters)

On the daily chart, crude oil prices are trading below the pairs of long-term and short-term exponential moving averages with prices now testing the 21-day EMA. The pairs of exponential moving averages, coupled with decline in volumes, suggests a strong bearish trend in oil prices. The 21-day EMA is the primary hurdle for crude oil followed by other EMAs. At present, there are plenty of negative crossovers to remain caution in oil on the long side.

Key Takeaways

  • Crude oil prices are trading below the pair of long-term (200 & 50) and short-term (21 & 9) exponential moving averages, suggesting strong a bearish trend.
  • The volume is declining with a slight increase in price, and high probability could be assigned to profit booking due to a decline in volume and a slight recovery in prices.
  • The immediate resistance would be USD 55.50- USD 56.00.

Trend Analysis and Future Expectations

LCO Daily Chart (Source: Thomson Reuters)

On applying the Ichimoku clouding technique on the daily chart, it could be observed that the prices are trading below Span A with a negative cross between the conversion line and the base line, reflecting a bearish trend, and the spread between Span A and Span B is increasing, which reflects that the present trend is strong.

The 14-day Relative Strength Index is near the oversold zone and presently rebounding from the bottom, which assigns a high probability for the prices to test the resistance zone of USD 55.50- USD 56.00.

Key Takeaways

  • Crude prices are below Span A with a negative cross between the conversion line and the base line, reflecting a strong bearish trend.
  • The spread between Span A and Span B is increasing, suggesting bears are in momentum.
  • The 14-day RSI is rebounding from the overbought zone, assigning a high probability of crude moving upside to test the resistance.

However, despite all the negative signs, the futures curve for crude is intriguing as it is sloping upwards.

Crude Futures Curve (Source: Thomson Reuters)

(Note: Convenience yield is a negative cost for any commodity producers)

The upward sloping futures curve suggests that the present benefit of holding crude in physical is higher than its storage cost, which is quite contrarian to the price behavior and demands further investigation.


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