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? |
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