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Gold & Silver Weekly; Are we there yet?

With Miss Yellen on the helm, equity market look set to continue on a move higher despite strong fundamental reason that a bubble is in the making. As long as central banks are offering easy monetary policies for a foreseeable future, investors could continue to ignore fundamentals and invest to make more return. Hedge funds and banks are busy offering financial products that focused on taking advantage of such idea. If we apply the same concept on previous gold rally and correction, faith and easy money is the key ingredient for higher prices. Western Central bankers are far more worried of a deflation trap which could cripple their economy (reference is Japanese economy). Last week, some ECB speakers also made it clear that zero interest rate could be an option to help spur demand in the economy. We continued to see how each of the world powers is devaluing their currencies in order to maintain their so called recovery. What comes around goes around and this analogy hold true given how challenging it will be for the world equity market to sustain their current rally.

Money parked offshore or previously in developing economies is coming back to developed economies. This hot money is currently working on the equity market but with a diminishing return. Elected politicians are taking advantage under the false pretence that the economy is roaring back to life - given how robust the equity market is. The current problem is consumers do not feel the benefits as much as what politicians preached, rising house prices and energy costs but with falling wages. It will not take us back to the Promised Land but it will ease the pain for now.

Gold Technical Outlook

Weekly Chart
As per our previous commentary “Should the yellow metal found support above $ 1251 in the next few weeks, we could see higher prices with possible test at $ 1361 followed by $ 1378 and $ 1400. We continue to favour certain positioning by hedge funds and other institution investors given rising uncertainty leading up to US debt ceiling negotiation. A break above the downtrend channel line at $ 1400 could indicate further momentum to retest $ 1500 area in the coming weeks. Selling gold has been a one-sided trade and there are enough room for investors to target higher prices.

We also would like to add that as long as gold managed to trade above $ 1251, the weekly chart paints a rather bullish channel line of a descending triangle. Last week close was a hammer candle which suggests the potential for higher prices in the next few weeks. As long as we see a weaker dollar and a potential correction in the equity market, holding gold is a better bet as we approach the end of the month.

Resistance: $ 1306, $ 1360, $ 1378 Support: $ 1378, $ 1262, $ 1251

Traders Notes: Long 1 unit at $ 1278 and add accordingly with stop at $ 1251 - targets at $ 1317, $ 1335 and $ 1364.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6- 12 months)
Bullish - $ 1378 Bullish - $ 1408 Target $ 1500 / $ 1600

Silver Technical Outlook

Weekly Chart
We previously commented that “At the moment, silver prices look set to retest support at $ 21.00 area and if that fails then we see lower prices.

Silver market look set to continue trading at such low level but reaching a certain stage of consolidating after the sell-off. It could be too early to tell if a bottom is in and the white metal will be at the mercy of the next price movement in gold. Otherwise, we could see a delayed effect on silver prices. Given the “confidence” in the current market place, it is a mystery that silver prices remain subdued.

Resistance: $ 22.45, $ 23.90, $ 24.53 Support: $ 20.40, $20.00, $ 19.50

Traders Notes: Previous long position got stopped out. Look to place another long should prices break above $ 21.55 with target at $ 22.15.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6 - 12 months)
Bullish on break of $ 23.60 Bullish target $ 26.45 Bullish - a potential bull run?

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

18 Nov 2013 | Categories: Gold, Silver

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