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Stuck Inside Consolidation

Monday’s bearish breakdown below support of the 20-Day MA, 50-Day MA, and long-term downtrend line confirmed the continued development of a bearish pennant consolidation pattern. Nonetheless, there is no signal until natural gas breaks out of the pattern. The small symmetrical triangle pennant is bearish because it resides within a larger downtrend. If a downside breakout occurs the chance for the trend to continue lower increases.

Choppy Price Action Until Breakout Likely

Alternatively, an upside breakout triggers a bullish reversal that has the potential to see further strengthening. Initial signs of either a bullish or bearish breakout occur on a move through one of the two boundary lines. However, more reliable signals will be provided on a rise above the most recent swing high at 1.94 or a drop below the last swing low at 1.59. If natural gas reaches the lower boundary line of the pennant and support is seen, the chance for a rally back towards to top line is likely once there is a sign of a bullish reversal. In other words, if natural gas trades inside the pennant, choppy price action will likely continue.

Long-Term Resistance Held During Recent Rallies

The two most recent rallies encountered resistance around previous support from the prior trend lows of February and April 2023 (green and red arrows). That is a logical area to encounter resistance in a downtrend and encountering resistance there supports a bearish continuation of trend. Moreover, the lower dashed blue line in a falling parallel trend channel further marked a similar resistance area.

If a breakdown does occur there is a shelf of long-term support going down to a low of 1.44. That low last provided support at the trend low from 2020. Further, it was the lowest price seen in natural gas since 1995.

For a look at all of today’s economic events, check out our economic calendar.

The average annual price of Brent crude oil stood at 83 U.S. dollars per barrel in 2024. This is according to preliminary data from March. This is nearly 20 U.S. dollars lower than the 2022 annual average, when an energy supply shortage and concerns over fallout from the Russia-Ukraine war saw prices surge. Brent is the world’s leading price benchmark for Atlantic basin crude oils. Crude oil is one of the most closely observed commodity prices as it influences costs across all stages of the production process and consequently alters the price of consumer goods as well.

What determines crude oil benchmarks?

In the past decade, crude oil prices have been especially volatile. Their inherent inelasticity regarding short-term changes in demand and supply means that oil prices are erratic by nature. However, since the 2009 financial crisis, many commercial developments have greatly contributed to price volatility; such as economic growth by BRIC countries like China and India, and the advent of hydraulic fracturing and horizontal drilling in the U.S. The outbreak of the coronavirus pandemic and the Russia-Ukraine war are examples of geopolitical events dictating prices.

Light crude oils – Brent and WTI

Brent Crude is considered a classification of sweet light crude oil and acts as a benchmark price for oil around the world. It is considered a sweet light crude oil due to its low sulfur content and a low density and may be easily refined into gasoline. This oil originates in the North Sea and comprises several different oil blends, including Brent Blend and Ekofisk crude. Often, this crude oil is refined in Northwest Europe.

Another sweet light oil often referenced alongside UK Brent is West Texas Intermediate (WTI). WTI oil prices amounted to 77.58 U.S. dollars per barrel in 2023.

XAU/USD Current price: $2,393.71

• Financial markets are in risk-on mode amid a potential escalation in Middle East tensions.
• The odds for a Federal Reserve rate cut in July dropped to roughly 41%.
• XAU/USD resumed its advance after a brief downward correction, could reach fresh all-time highs.

XAU/USD extends its recovery on Tuesday, approaching the $2,400 threshold mid-American session. Gold started the week on the back foot, sliding towards  $2,324.12 on Monday, but slowly recovered the ground lost amid a persistently sour market mood.  

Market players keep dropping bets on a Federal Reserve (Fed) rate cut in July, currently betting on a roughly 41% chance of happening. Strong United States (US) data coupled with concerns about the Middle East conflict between Iran and Israel will push inflation back up amid upward pressure in oil prices.

Asian and European indexes closed in the red, reflecting market fears, while Wall Street trades mixed. The Dow Jones Industrial Average (DJIA) managed to bounce back, but the Nasdaq and the S&P500 remain under pressure, weighed by the tech sector.

Fed Chairman Jerome Powell will participate in a panel discussion with other central banks’ authorities, although he is not expected to surprise markets. If something, Powell may reaffirm the Fed’s hawkish stance, further weighing on the market sentiment. Meanwhile, the Israeli war cabinet finished its post-Iran attack over the weekend, and news outlets indicate retaliation is coming.

XAU/USD short-term technical outlook

From a technical point of view, XAU/USD is poised to extend gains. The daily chart shows technical indicators resumed their advances after correcting extreme overbought conditions, with the pair posting a higher high and a higher low. Additionally, all moving averages head firmly south, well below the current level, reflecting persistent buying interest.

In the near term, and according to the 4-hour chart, the bullish case is even more evident. XAU/USD met intraday buyers around a bullish 20 SMA, now bouncing sharply from the indicator. The 100 and 200 SMAs, in the meantime, maintain their bullish slopes below the shorter one. Finally, technical indicators resumed their advances, with the Relative Strength Index (RSI) indicator accelerating north around 63.

Support levels: 2,391.80 2,378.05 2,363.35

Resistance levels: 2,409.20 2,431.43 2,450.00

XAU/USD Current price: $2,393.71

• Financial markets are in risk-on mode amid a potential escalation in Middle East tensions.
• The odds for a Federal Reserve rate cut in July dropped to roughly 41%.
• XAU/USD resumed its advance after a brief downward correction, could reach fresh all-time highs.

XAU/USD extends its recovery on Tuesday, approaching the $2,400 threshold mid-American session. Gold started the week on the back foot, sliding towards  $2,324.12 on Monday, but slowly recovered the ground lost amid a persistently sour market mood.  

Market players keep dropping bets on a Federal Reserve (Fed) rate cut in July, currently betting on a roughly 41% chance of happening. Strong United States (US) data coupled with concerns about the Middle East conflict between Iran and Israel will push inflation back up amid upward pressure in oil prices.

Asian and European indexes closed in the red, reflecting market fears, while Wall Street trades mixed. The Dow Jones Industrial Average (DJIA) managed to bounce back, but the Nasdaq and the S&P500 remain under pressure, weighed by the tech sector.

Fed Chairman Jerome Powell will participate in a panel discussion with other central banks’ authorities, although he is not expected to surprise markets. If something, Powell may reaffirm the Fed’s hawkish stance, further weighing on the market sentiment. Meanwhile, the Israeli war cabinet finished its post-Iran attack over the weekend, and news outlets indicate retaliation is coming.

XAU/USD short-term technical outlook

From a technical point of view, XAU/USD is poised to extend gains. The daily chart shows technical indicators resumed their advances after correcting extreme overbought conditions, with the pair posting a higher high and a higher low. Additionally, all moving averages head firmly south, well below the current level, reflecting persistent buying interest.

In the near term, and according to the 4-hour chart, the bullish case is even more evident. XAU/USD met intraday buyers around a bullish 20 SMA, now bouncing sharply from the indicator. The 100 and 200 SMAs, in the meantime, maintain their bullish slopes below the shorter one. Finally, technical indicators resumed their advances, with the Relative Strength Index (RSI) indicator accelerating north around 63.

Support levels: 2,391.80 2,378.05 2,363.35

Resistance levels: 2,409.20 2,431.43 2,450.00

Gold’s technical outlook indicates a modest increase of 0.08%, bringing the price to $23,384.79. Currently, gold is holding slightly above the pivotal $2,370.67 mark. Resistance levels are observed at $2,403.98, with subsequent limits at $2,431.98 and $2,459.86 that could restrain further advances.

Support is initially positioned at $2,323.92, with additional fallbacks at $2,296.85 and $2,268.55 should the price retreat. The 50-day Exponential Moving Average (EMA) is at $2,337.46, while the 200-day EMA stands at $2,226.21, indicating potential support zones.

The market is currently observing a consolidation near the $2,084 level, and the formation of a doji candle at $2,385 suggests there could be a temporary bearish correction towards $2,370 before any upward movement resumes. The technical stance is bullish above $2,370.67, but a drop below this level could trigger a sharp decline in prices.

However, Iran’s efforts to avoid further escalation could alleviate immediate concerns about major conflicts, potentially bolstering market sentiment. Consequently, this improvement in risk sentiment may exert negative pressure on safe-haven assets like silver (XAG/USD), as investors pivot towards riskier alternatives, diminishing demand for safe-haven options.

Market participants are closely monitoring geopolitical developments in the Middle East, recognizing their significant influence on market sentiment and commodity prices.

Speculations on Federal Reserve’s Rate Policy and Its Impact on Silver Price (XAG/USD)

Expectations of a delay in anticipated rate cuts have emerged, with the first cut now anticipated in September rather than June. This shift in expectations is driven by concerns regarding persistent inflation and a robust US economy. The anticipation of prolonged higher interest rates has implications for precious metal prices, including Silver.

Higher interest rates typically strengthen the US dollar, rendering dollar-denominated commodities like Silver relatively more expensive for investors using other currencies. Consequently, this scenario may constrain the upside potential for Silver prices in the immediate future.

Impact of Upbeat US Retail Sales Data on Silver Price (XAG/USD)

 

The Silver price (XAG/USD) has been impacted by the release of upbeat US Retail Sales data for March. The data, reported by the US Census Bureau, revealed a 0.7% month-on-month (MoM) increase, surpassing expectations of a 0.3% rise. This robust growth, exceeding the previous month’s revised figure of 0.9%, reflects strong consumer spending and hints at potential inflationary pressures ahead.

XAU/USD Current price: $2,341.03

• The yield on the 10-year Treasury note hit its highest since mid-2023.
• Tensions between Israel and Iran undermine the market mood.
• XAU/USD consolidates around its daily opening, may extend its corrective slide.

Gold consolidates around $2,350 a troy ounce on Monday, struggling to find directional strength in a risk-averse environment. XAU/USD hit an all-time high of $2,431.43 on Friday but closed the day in the red amid continued US Dollar demand combined with profit-taking ahead of the weekly close.

Weekend news kept concerns alive as Iran launched a massive attack on Israel, spurring fears of an Israeli retaliation. Western allies called for the latter to avoid escalating the conflict, but it’s unclear what Israeli Prime Minister Benjamin Netanyahu could do next. Netanyahu is discussing with its cabinet whether or not they will hit back at Iran. Tensions affected Oil prices the most but also backed demand for the Greenback.

The US Dollar is also benefiting from running Treasury yields. The 10-year note currently offers 4.64%, up 13 basis points (bps) and its highest since June 2023. The 2-year note yields 4.94%, up modest 6 bps. Meanwhile, Wall Street battles to reverse Friday’s losses, with the three major indexes trading mixed.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair shows it may extend its corrective slide. The pair posted a lower low and lower high but remains above all its moving averages, with a firmly bullish 20 Simple Moving Average (SMA) providing dynamic support at around $2,259.00. Technical indicators, in the meantime, retreated from their recent highs but remain within overbought readings.

In the near term, and according to the 4-hour chart, the risk of a downward extension has increased. A flat 20 SMA caps advances at around $2,356.00, while the longer moving averages are partially losing their upward momentum. The Momentum indicator stands just above its 100 level trying to resume its advance, while the Relative Strength Index (RSI) indicator gains downward traction around 49. The bearish case will be stronger if XAU/USD breaks through $2,319.20, a strong support level.

Support levels: 2,333.80. 2,319.20 2,303.80  

Resistance levels: 2,356.10 2,365.25 2,380.00  

XAU/USD Current price: $2,341.03

• The yield on the 10-year Treasury note hit its highest since mid-2023.
• Tensions between Israel and Iran undermine the market mood.
• XAU/USD consolidates around its daily opening, may extend its corrective slide.

Gold consolidates around $2,350 a troy ounce on Monday, struggling to find directional strength in a risk-averse environment. XAU/USD hit an all-time high of $2,431.43 on Friday but closed the day in the red amid continued US Dollar demand combined with profit-taking ahead of the weekly close.

Weekend news kept concerns alive as Iran launched a massive attack on Israel, spurring fears of an Israeli retaliation. Western allies called for the latter to avoid escalating the conflict, but it’s unclear what Israeli Prime Minister Benjamin Netanyahu could do next. Netanyahu is discussing with its cabinet whether or not they will hit back at Iran. Tensions affected Oil prices the most but also backed demand for the Greenback.

The US Dollar is also benefiting from running Treasury yields. The 10-year note currently offers 4.64%, up 13 basis points (bps) and its highest since June 2023. The 2-year note yields 4.94%, up modest 6 bps. Meanwhile, Wall Street battles to reverse Friday’s losses, with the three major indexes trading mixed.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair shows it may extend its corrective slide. The pair posted a lower low and lower high but remains above all its moving averages, with a firmly bullish 20 Simple Moving Average (SMA) providing dynamic support at around $2,259.00. Technical indicators, in the meantime, retreated from their recent highs but remain within overbought readings.

In the near term, and according to the 4-hour chart, the risk of a downward extension has increased. A flat 20 SMA caps advances at around $2,356.00, while the longer moving averages are partially losing their upward momentum. The Momentum indicator stands just above its 100 level trying to resume its advance, while the Relative Strength Index (RSI) indicator gains downward traction around 49. The bearish case will be stronger if XAU/USD breaks through $2,319.20, a strong support level.

Support levels: 2,333.80. 2,319.20 2,303.80  

Resistance levels: 2,356.10 2,365.25 2,380.00  

Recent Signs of Strength Hit with Resistance

Recent attempts to strengthen the price of natural gas have been met with failures. Last week’s swing high of 1.94 completed a lower swing high, relative to the higher March 1 swing high. Further, recent strength was met resistance below lower blue dashed parallel channel line. In other words, the dashed line represents potential resistance, and evidence for resistance was seen. Such behavior reflects continued downward pressure on the price of natural gas, which was confirmed with today’s breakdown.

Moving Average Support Zone Fails

Notice that the downtrend line, orange 50-Day MA, and purple 20-Day MA had all converged around the same potential support zone. There was a clear chance for the zone to reject price to the upside and it has failed to materialize. Instead, a bearish breakdown has been triggered, putting short-term price action in alignment with the larger bearish trend. A breakdown from consolidation is first indicated on a drop below the lower boundary line, but more so on a decline below the most recent swing low at 1.59.

Range Bound Until Pennant Breakout

Regardless of the bearish nature of the pennant pattern, it won’t matter much until there is a breakout of the pattern. Choppy range bound trading is likely for the time being if the pennant continues to evolve. Certainly, the pattern could evolve for a while longer with trading contained within its boundaries. Therefore, a bounce off the lower boundary line could eventually lead to a test of resistance at the top line of the pattern. At that point, a bullish reversal may also be a possibility. Given recent history, an upside breakout would be triggered on a rally above the most recent seeing high at 1.94.

For a look at all of today’s economic events, check out our economic calendar.

The U.S. Energy Information Administration (EIA) raised its West Texas Intermediate (WTI) oil price forecast for 2024 and 2025 in its latest short term energy outlook (STEO), which was released last week.

The EIA now sees the WTI spot price averaging $83.78 per barrel this year and $82.48 per barrel next year, according to the report, which projected that the commodity will average $85.30 per barrel in the second quarter of 2024, $86.84 per barrel in the third quarter, and $85.17 per barrel in the fourth quarter. In the first quarter of this year, the WTI spot price averaged $77.50 per barrel, the STEO showed.

In 2025, the EIA expects the WTI spot price to average $83.84 per barrel in the first quarter, $82.50 per barrel across the second and third quarters, and $81.16 per barrel in the fourth quarter, according to the STEO.

The EIA forecast in its previous March STEO that the WTI spot price would average $77.08 per barrel in the first quarter of 2024, $83.80 per barrel in the second quarter, $84.50 per barrel in the third quarter, $83.50 per barrel in the fourth quarter, and $82.15 per barrel overall in 2024.

That STEO showed that the EIA expected the WTI spot price to come in at $82.84 per barrel in the first quarter of 2025, $81.50 per barrel in the second quarter, $79.50 per barrel in the third quarter, $77.50 per barrel in the fourth quarter, and $80.30 per barrel overall in 2025.

In a research note sent to Rigzone last Monday, J.P Morgan projected that the WTI crude price will average $79 per barrel in 2024 and $71 per barrel in 2025. In that note, J.P. Morgan forecast that the commodity will average $75 per barrel in the first quarter of 2024, $80 per barrel across the second and third quarters, $81 per barrel in the fourth quarter, $78 per barrel in the first quarter of next year, $73 per barrel in the second quarter, $69 per barrel in the third quarter, and $65 per barrel in the fourth quarter.

In a report sent to Rigzone last Tuesday, Standard Chartered forecast that the NYMEX WTI basis nearby future price will average $91 per barrel in the second quarter of 2024, $95 per barrel in the third quarter, $103 per barrel in the fourth quarter, $104 per barrel in the first quarter of 2025, $100 per barrel in the second quarter, and $108 per barrel in the third quarter.

Standard Chartered projected in that report that the commodity will average $106 per barrel overall in 2025, $125 per barrel overall in 2026, and $112 per barrel overall in 2027.

In a report sent to Rigzone at the start of the month, BofA Global Research revealed that it had increased its 2024 WTI price forecast to $81 per barrel.

BMI, a Fitch Solutions company, projected in a report sent to Rigzone at the end of March that the WTI crude price will average $82 per barrel in 2024 and $81 per barrel in 2025.

Also last month, executives from oil and gas firms revealed where they expected the WTI crude oil price to be at various points in the future as part of the first quarter Dallas Fed Energy Survey.

The survey showed that the average response executives from 145 oil and gas firms gave when asked what they expect the WTI crude oil price to be at the end of 2024 was $80.11 per barrel. The low forecast in the survey was $70 per barrel, the high forecast was $120 per barrel, and the WTI price during the survey was $82.52 per barrel, the survey highlighted.

The latest Dallas Fed Energy Survey also asked participants where they expect WTI prices to be in six months, one year, two years, and five years. Executives from 135 oil and gas firms answered this question and gave a mean response of $79 per barrel for the six month mark, $81 per barrel for the year mark, $83 per barrel for the two year mark, and $90 per barrel for the five year mark.

To contact the author, email andreas.exarheas@rigzone.com

• Gold price jumps on a flight to safety after Iran attacked Israel late Saturday.
• US Dollar fails to benefit from geopolitical turmoil and higher US Treasury bond yields.
• Gold price looks north alongside 4H RSI ahead of US Retail Sales data.

Gold price is consolidating its rebound above $2,350 early Monday, reversing half the corrective decline from record highs of $$2,432 seen on Friday.

Gold price gains on flight to safety

Despite a recovery in Asian markets, led by the rally in Chinese stocks, investors remain in a wait-and-see mode before placing fresh bets on risky assets following late Saturday’s escalation in the Middle East geopolitical tensions.

Iran’s retaliatory drone attacks on Israel on Saturday spooked markets and rekindled the safety appeal of Gold price, as investors stay fearful of whether Iran’s unprecedented strike on Israel could fuel a wider regional conflict.

Gold price is also benefiting from a broadly weaker US Dollar (USD), as the Greenback pays little heed to the cautious market environment. Market participants likely believe that the recent upsurge in the US Dollar is excessive, and hence, they avoid creating fresh positions in the US currency even though US Treasury bond yields look to extend Friday’s positive momentum.

US Treasury bond yields keep up recent gains due to the pushback in expectations of the US Federal Reserve’s (Fed) interest cut from June to September, courtesy of elevated inflation level and a resilient US economy. The further upside in the Gold price, therefore, appears elusive on firmer US Treasury bond yields.

However, if risk sentiment sees a dramatic positive shift, it could trigger a fresh selling wave in Gold price. Traders are taking account of the UK, France and Egypt condemning Iran’s action while Saudi Arabia has called for restraint, calming markets somewhat so far this Monday. The S&P 500 futures are up 0.25% on the day, reflecting the renewed market optimism.

All eyes now remain on the geopolitical developments in the Middle East for fresh trading impetus in Gold price. If the Middle East turmoil worsens, Gold price could see an extension of the rebound toward $2,400. But a resurgent demand for the US Dollar on increased safe-haven flows and hawkish US Federal Reserve (Fed) expectations could act as a headwind to the Gold price upswing.

The top-tier US Retail Sales data due later on Monday could also have a significant impact on the value of the US Dollar and, in turn, on the USD-denominated Gold price.

with the monthly headline figure to increase by 0.3% in March, slower than February’s 0.6% rise.

Gold price technical analysis: Four-hour chart

As observed on the four-hour chart, Gold price is defending the 21-Simple Moving Average (SMA) at $2,356, at the moment.

The Relative Strength Index (RSI) has recpatured the 50 level, now holding near 53.0, suggesting that the upside bias appears intact.

Initial topside target is seen the intraday highs of $2,373, above which the $2,400 round figure will be tested again.

Acceptance above the latter will expose the record high of $2,432.

If the Gold price fails to hold above the 21-SMA at $2,356 on a four-hour candlestick closing basis, the correction could resume toward the previous day’s low of $2,334. The 50-SMA aligns near that level.

Further down, the previous week’s low of $2,319 will come into play.