Gold & Silver; A Capped Recovery
It is true; all of you readers have seen the above tagged line before. This is an old excerpt – courtesy of Time magazine which was published 3 years ago in 2011. After 3 years, the above statement should remain vivid but alas the global economy and investors are choosing to ignore and embrace what they deemed as a normal grow path to economic recovery. Economic recovery is a statement made popular as politicians and economists are heavily focused on but with several caveats. Yes, we are indeed on the recovery path but do not expect this to be a smooth one. Expect turbulence – with bold fiscal and monetary policies – experimental economic theory and best to stick with what government knows best – Printing Money.
For the moment, we will continue to see a fragile economy battling out to sustain the ever rising equity prices. All that was lost after the global economy recession has been patched back and multi high (even when it is superficial) are created. The extra paper money in the economy has to be invested and it is no better place but to submit to another potential bubble. Market can remain irrational for as long as it wants and who is to argue that the bull run in the equity market is over?
Gold Technical Outlook
Referring to the title of this week commentary, we continue to see a capped recovery in gold prices. The downtrend will remain as the sticking point for a much longer period as investors see the appreciation in the dollar index. With a possible interest rate hike as early as next spring 2015, the dollar index may have already discounted this. However, gold prices will remain deflated and any recovery could be easily stifled.
The weekly chart paints a bullish doji candlestick that could build a foundation for a reversal in the trend. Despite that, we will remain cautious and only buy if and when higher prices can sustain this trend reversal scenario. Only if we see a strong deflationary condition in the global economy, interest rate hike is still possible and a tightening in money printing will continue to add ammo to the bears.
Daily Resistance: $ 1179, $ 1193, $ 1208
Daily Support: $ 1130, $ 1141, $ 1149
Traders Notes: Warrant a buy at market open with a stop at $ 1158 to target the daily 50% retracement line at $ 1193 and then $ 1208 area. Will look to add more positions should price break out from $ 1183 or retraced to $ 1168 area for a short term target of $ 1193 area.
Short Term (1 – 3 weeks) = Bearish $ 1188
Medium Term (1 – 3 months) = Bearish $ 1050
Long Term (6- 12 months) = Target $ 1261
Silver Technical Outlook
Prices hit as long as $ 15.08 before a reversal caused by a weaker US dollar. Profit taking was also part of the cause as traders find no more sellers in the oversold market. The 4 hourly charts also made a strong case as the RSI failed to break lower – a contrary trade that signal a reversal. Only if prices can break above the 10 DMA at $ 16.11, expect more downside as we continue to take note that a strong support at $ 14.41 could be the target as prices come in play for a rebound and trend reversal.
Resistance: $ 15.91, $ 16.11, $ 16.43
Support: $ 15.08, $ 15.38, $ 15.51
Traders Notes: Expect previous support now resistance to stop any further advancement. Only a break above $ 16.11 may give a sign that further buying could escalate as traders look to unwind their short positions.
Short Term (1 – 3 weeks) = Flat
Medium Term (1 – 3 months) = Flat
Long Term (6 – 12 months) = A stable period of low prices
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10 Nov 2014 | Categories: Gold