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Commodities Gap Down as Risks Subside

By:
Colin First
Published: Apr 24, 2017, 07:24 UTC

As we have been mentioning over the last few days, gold prices dipped towards the 1266 level as the market gapped down to open the week. Over the last

Commodities Gap Down as Risks Subside

As we have been mentioning over the last few days, gold prices dipped towards the 1266 level as the market gapped down to open the week. Over the last week, we had seen the gold prices holding strong as the fears over the French elections continued to dominate the markets as the traders felt that Le Pen could end up with a good chance of winning and if that happens, it could mean the end of the euro. So, the funds began to search for safe assets to invest in and this helped to keep the gold prices near the highs of its range.

Gold Expected to Trade Weak

But over the weekend, the results from the French election showed a clear victory for Macron with Le Pen being second which means that they are up for a run off on May 7. But opinion polls predict an easy victory for Macron in the run off and with Macron being business friendly and pro-Euro, it means that the fears and the uncertainties have died down for now. This means that the traders now have more confidence in pulling out funds from safe assets and pushing them into the stock markets and this is the reason why we saw a huge gap down to 1266 when the gold prices opened for the day today. It has since recovered and trades just above 1270 as of this writing. Expect some consolidation and ranging for a large part of the day today and we expect the strong support at 1265 to hold for now.

Gold Hourly
Gold Hourly

Oil prices broke through the strong support region at around the $50-$50.5 mark and this is likely to signal a bear phase for the oil prices in the short term. Global risks and fears have continued unabated and as far as oil prices are concerned, reports suggest that it might be difficult for the production cut agreement to progress much beyond the middle of the year. Also, the incoming data does not show a much drying up of the inventory as well as the production and these concerns have affected the oil prices and pushed it lower and lower through the course of last week. We expect the weakness to continue for today and now the region around $50.5 should see a lot of selling.

Silver prices also gapped down when they opened for the day but have since recovered and it is now trading just below $18 but expect the weakness to continue through the course of the day.

 

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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