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Gold & Silver; Bank Run!

Bullion Round Up

The build-up to a potential bailout of Cyprus was slow and steady until the eventful last weekend that shock the periphery. Such bailout arrangement has no precedence; instead it will probably be the first and could well be applied to the other countries. Many experts and traders felt that it will be a straightforward bailout. However, there is a growing resistance from German taxpayers on another bailout and other countries pray that there will not be any negative contagion on their already fragile economy. Looks like their prayers were not answered.

Stocks slump in Asia and European exchanges did not fare any better. The risk off sentiment force traders to do some light covering and profit taking on the back of the stock market rally, particularly in the US. Safe haven bets are back on as gold benefited to move above the psychological level of $ 1600. The current price looks capped with resistance littered at $ 1610 and $ 1620 (February high). In addition, the US dollar index is stronger at 82.82 as FX traders sold the Euro and run to the safety of a stronger USD. The positive takeaway here is that gold managed to move higher alongside the USD which gives investors some comfort that safe haven interests still exist. The question remains how long will the positive contagion on gold last?

Gold look poised to move higher and the setups do favour the upside. We take into consideration from the recent negative press it received as well as a large outflow on ETF that may be filled by dip buyers. The lower prices on gold gave long term investors the reason to further accumulate their holdings. In addition, the return of any crisis or instability may boost the demand for safe haven assets once again. This week, traders are also anticipating FOMC statements that could paint a clearer picture of what the Fed will do next. Any signs of tapering QE programme will cause panic selling on gold. On the flip side, gold could continue with higher prices that may eventually squeeze out sellers to cover their short positions.

We will not be surprise if there are more banks run and we could anticipate a stock market correction that may soon create higher gold prices. Gold might run higher soon!

Gold Technical

Safe haven buying on gold run rampant as prices storm above the psychological level of $ 1600 and managed to retain its gain. Several resistances were taken out on the Daily chart and prices are trading comfortably above the 10 and 20 DMA. In addition, the stochastic remain rooted on the positive which suggest buying interest is strong and the RSI has moved higher to 51.87.

Gold will attempt to break above the resistance at $ 1620 (February high) and should that be given, we felt that prices will rally further as short covering will be in full force. Should prices trade above that level, several key MA can cross higher and that should give the MACD a good chance to break cross higher into positive territory.

One could argue that the selloff in gold has slowed down considerably and any increase in ETF demand as well as the physical demand, gold is set to move higher. Should we break $ 1620, we could see a quick rally to test $ 1650 and $ 1700.00.

Long gold at $ 1592 (2 contracts) target $ 1598 and $ 1604 with a stop loss at $ 1587.50 - trade close with a profit.
Long gold at $ 1620.00 target $ 1630 with a stop loss at $ 1611.50.
Resistance: $ 1611, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1603, $ 1600, $ 1584.86, $ 1580.39, $ 1561.4, $1555, $ 1545, $ 1525, $ 1522 (2012 low)

Silver Technical

Prices traded higher and managed to move above $ 29.00 but once again silver is unable to hold on above that level. As of the time of writing, silver trades at $ 28.93 and retest support at $ 28.60 - twice. The 4 hourly charts still show a tight Bollinger band that sustains prices within this range. In addition, the MACD is not lending any buying momentum while the stochastic criss-cross, showing uncertainty.

Meanwhile, the daily chart shows a pickup in volume and the recent price action create a long hammer tail that may support prices to move higher. We cannot help but repeat ourselves that we are paying extra attention on the Bollinger band that is converging closer and a breakout is imminent.

We advise caution on any silver trade and will only get more bullish if $ 29.50 is given.

Long silver at $ 29.40 target $ 29.80 with a stop loss at $ 29.15
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.60, $ 28.33, $ 27.93, $ 27.50

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.

19 Mar 2013 | Categories: Gold

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