Gold & Silver; 2015 Kick Off
Many of us will be wondering what 2015 has in store for the precious metal market. Before we embark on the above, let us take a quick look at what could drive it.
Overall view has been curtailed with lower commodity prices, stronger US dollar and the never ending rally of the equity market. This is also followed by the on-going uncertainty in the Eurozone as Greece contemplates on the idea of leaving the single currency. Other known fact is that the Mr Draghi at the ECB will have to do something fast and hard. Rather than sticking to his usual stance of doing whatever it takes, the single currency is set to make remarkable changes. Draghi has a lot on his plate to fight deflation, introduce a big enough QE and maintain policy to curb the ever rising rate of unemployment. Meanwhile, the US dollar strength should continue strong for a foreseeable future as the Federal Reserve aim to raise interest rate as the US economy grows stronger.
Here comes the unknown and what many would assume as black swan events. Let us assume Greece exit and how does the other EU members contain such contagion? The Eurozone bloc is prone to slow changes and has often failed to stick with or make hard-core policy changes. Many would wonder with additional equity in the market, what are the side effect will it bring? The stand-off between Russia and Ukraine set to continue but should that end in a peaceful agreement, the rouble look to stabilise but the long term damage with oil prices have been done unless we see a cut in production. Developing economies may not fare any better as well – but continue to offer a substantial opportunity should investors look to diversify.
Expectation of 2015 within the precious metal community remains mixed. Goldman Sachs continues to predict lower prices with a target of $ 1055 or even lower. While other established analysts see that a bottom in gold is set in place with a potential reversal. The latter remains a possibility since 2015 economic policy may be far more stringent as world leaders are looking to make difficult transition. Stricter financial policies, increase interest rate as well as the threat of deflation could further fuel the need for central bankers to continue with ease on monetary policy. EU and China are looking to extend such tools while the US looks to tighten.
Gold Technical Outlook
Prices remain congested on the downtrend channel line and only a break above $ 1209 will allow the next upside to target anything near the region of $ 1239 and $ 1250 area. Our view remain bearish as gold trade within a descending triangle pattern and any breakout could see another leg lower with a potential target of $ 1030 and even $ 900 region.
Trade: Buy on the break of $ 1209 with a stop loss at $ 1199 to target $ 1218 and then $ 1239 area (valid only for this week)
20 WMA = 1209
50 WMA = 1265
100 WMA = 1315
Silver Technical Outlook
The ever turbulent white metal continues to trade within the large downtrend line. We remain pessimistic that any upside can be sustained at this stage unless we see a recurrence back in 2010 and 2011 period of crazy QE.
Trade: Resistance stands at $ 16.43 and a downside biased remains but we will not discount that short term upside is possible but limited. RSI is not overbought but near strong resistance at 50.00 index level. Therefore, no good setup so best on the sideline.
20 WMA = 16.43
50 WMA = 18.01
100 WMA = 19.27
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05 Jan 2015 | Categories: Gold