Gold & Silver limped higher alongside US dollar index - Sharps Pixley
Bullion
Round Up
Gold remain caged
between $ 1660 to $ 1690 area due to the lack of direction and
catalyst. Mixed economic data from the US and Europe sent a rather
confusing picture for traders to react with. Short term traders
reacted well by buying on the back of poor economic news and quickly
offload via profit taking before they get caught out by another
surprising good data.
The fundamental
remains the same as the Fed maintain to expand their balance sheet
and promote low interest rate to stimulate the economy. Other
countries have followed suit with money printing programs that is
supportive on gold prices. Central banks remain the primary buyer on
gold bullion while smart investors are diversifying into silver bars
as well. Long term investors are sceptical that the economy is
growing at a pace that was proclaimed by politicians. With the
current rate of currency debasement, it is only a matter of time before we
see bullion prices breaking out of this tight range to head higher.
Economic
Round up
The ECB is
expected to keep its interest rate at 0.75% despite the recent
optimistic economic data. Mr. Draghi may play a cautious card,
arguing that these accommodative policies are in place so as to
encourage governments to resolve the long-running crisis via
structural reforms. Euro sceptics warned that repayment of the LTRO
money is not necessarily good news. They argued banks were choosing
to repay because demand for credit remains weak.
Meanwhile, Asian
markets are setting up for a quiet week with Chinese Lunar New Year
upon us. Stock markets are closing on the 11th to 15th
of February to celebrate and welcome the year of water snake.
Gold
Technical
Short Term:
Gold
prices surged higher this morning and holding at $ 1673. We expect a
slowdown in physical demand from Asia as we approach the Chinese
Lunar New Year in the next 2 weeks. According to historical data from
the last two years, gold prices tend to dip lower during the festive
season before rising higher. Traders could see more consolidation on
prices as it trades within the $ 1660 to $ 1690 area. Yesterday’s
price action indicates that support is found at $ 1660 and gold broke
higher to overcome the 38.2% retracement level at $ 1669 (basis on
January low). Buying pressure prevail despite a stronger US dollar
index which might suggest safe haven appeal.
Medium Term:
Gold
tested support at $ 1661 - completing a triangle bottom before
buying pressure pushed it to $ 1671. Traders remain sceptical and
buying interest is generally small due to the lack of direction. The
yellow metal has support at previous low of $ 1652 and January low at
$ 1625. As per our commentary, we look to buy only if gold price
crossed $ 1686 and January high of $ 1697.
We look to short the market only if the support at $ 1652 gives way. In the meantime, gold may need to consolidate further and find support before eventually taking out the higher resistance. Look to buy only at $ 1686. Resistance: $ 1686, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1653, $ 1635, $ 1625 |
Silver
Technical
Short Term:
Yesterday, silver consolidated after a short rally and found support
at $ 31.40. The current price is consolidating at $ 31.70 and still
shy of breaking the downtrend line. The 1 hour chart paints a
bullish indication that selling pressure is overcome with dip buyers
at that level. Therefore, the short term support lies on $ 31.317 and
$ 31.12. Meanwhile, silver has got several resistances to tackle
before it has the ability to target higher numbers. Short term
resistance stands at $ 32.144 and $ 32.279 respectively. We are
potentially looking at an ascending triangle pattern that could be
bullish for silver in the next few weeks.
Medium Term:
We
would like remind our readers that silver is still range trading
between $ 31.00 to $ 32.00 areas. Expect more volatile trading as we
draw closer to this Thursday ECB’s interest rate decision as well
as the on-going allegations of PM Rajoy and the world oldest banks in
Italy. Look to buy silver should it cross $ 32.00 level again as it
indicate that investors are eroding the resistance levels.
A break below $ 31.00 will send us a
bearish signal as the silver market is not ready to rally and
could test support at $ 29.25 again. However, should prices break
above $ 32.00 and maintain that gain then it will be sufficient
confirmation that it can target the January high of $ 32.47.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 31.23 (38.2%), $ 30.60 (200 DMA), $ 29.25 (January low) |
Currencies
Currencies | Value | Change comment |
Euro | 1.3511 | Continuous allegation on PM Rajoy is eroding confidence. In addition, Spanish bond yield is on the rise. It is also a good excuse for profit taking after a strong rally. |
AUD | 1.0416 | No change in AUD interest rate decision. |
JPY | 92.42 | Expect JPY at 90.00 - 95.00 in the next few months. |
US Index | 79.55 | US dollar index is recovering with higher numbers. Possible safe haven appeal. |
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