Gold Prices Aiming Lower After Chart Support Break

GOLD & CRUDE OIL TALKING POINTS:

• Gold price breakdown implies measured downside target near $1215/oz
• Crude oil prices treading water, struggling to break above $65/bbl mark
• Thin holiday liquidity may stall progress, but also amplify sudden jolts

Gold prices edged higher despite a stronger US Dollar in what looked like a correction after the metal hit a four-month low. Lower bond yields against the backdrop of global slowdown fears after a worrying set of Eurozone PMI figures seemingly helped enable the tepid recovery.

Crude oil prices idled in familiar territory. A modest rise brought the WTI contract up off the monthly range floor but that was the extent of what buyers could muster. Perhaps traders were just not prepared to show directional commitment ahead of closures for a long holiday weekend in most major markets.

COMMODITY PRICE SPIKES POSSIBLE IN THIN LIQUIDITY

Liquidity has almost certainly drained to a trickle and will remain scarce while most of the world’s bellwether exchanges are shuttered, first for the Good Friday holiday and thereafter for Easter Monday. This probably means near-standstill for commodity prices until Tuesday.

Having said that, it is important to remember that over-the-counter spot commodities like gold never truly “close” and US markets return Monday, so crude oil futures will be open to trade. If a particularly eye-catching headline hits the wires, low participation levels may amplify any kneejerk volatility.

See the latest gold and crude oil forecasts to learn what will drive prices in the second quarter!

GOLD TECHNICAL ANALYSIS

Gold prices paused to consolidate losses after completing a bearish Head and Shoulders (H&S) chart formation. Near-term support is in the 1260.80-63.76 area, with a break below that targeting the 1235.11-38.00 zone. More broadly, the H&S setup calls for a measured move down to 1215.00. Alternatively, breaking back above neckline support-turned-resistance at 1281.41 targets the 1303.70-09.12 region.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are treading water at resistance in the 63.59-64.88 area. A break above that as well as the follow-on 66.09-67.03 inflection zone sets the stage to challenge the $70/bbl figure. Alternatively, a daily close trend line support at 61.50 overturns the uptrend from December lows and sets the stage for deeper losses. The subsequent downside barriers come up at 60.39 and the 57.24-88 region.

COMMODITY TRADING RESOURCES

• See our guide to learn about the long-term forces driving crude oil prices
• Having trouble with your strategy? Here’s the #1 mistake that traders make
• Join a Trading Q&A webinar to answer your commodity market questions

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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