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Gold & Silver; Bearish Sentiment

Bullion Round Up

Gold faced strong resistance in front of the psychological level $ 1400.00 and it has tried 5 times to break higher. Despite the weakness in equities as well as the dollar index, the rally in gold did not materialise enough strength and sellers remain dominant above the $ 1400 and $ 1414 level. Only a break above $ 1414 resistance level will allow the bulls to test higher numbers. However, other resistance stands at $ 1419 and $ 1438 area which acted as previous support. Gold is still in a bear market and bearish sentiment outweighs the positive catalysts that usually support the yellow metal. At the moment, only physical and central banks buying are supporting the gold price and sentiment. Nevertheless, gold will continue to face headwinds from a strong US dollar index, soaring equities as well as the prospect of continued low inflation numbers.

On other news, Israel central banks cut interest rate for the second time in a month. Governor Stanley Fischer is embarking to further weaken the currency so as to maintain the competitiveness in Israel’s export driven economy. Other analysts simply see Israel joining the global currency wars and cutting interest rate is just one of the tools. Other factors influencing the rate cut is the low inflation numbers that allow the governor to embark on this policy and more cuts are to be expected. The message is clear, Israel’s Shekel will remain weak in the near future and it is bound to stay. This can also be applied to many other currencies where their central banks are embarking to do further easing. Currency debasement seems to dominate in 2013 and it seems to support a strong rally in equities. Gold seems destined to trade lower for now but could well garner strength once inflation seeps in.

Gold Technical

Physical buying of gold is expected to slow down as supply play catch up with demand. Investors are growing more cautious as they wait for lower prices to restock. ETFs holders continue to liquidate their positions, adding negative sentiment on gold as a safe haven. Market analysts further confirm the technical weakness in gold which favour more downside in the near term. CFTCs report also state that the Commercials are becoming more bullish while the Hedge Funds and money managers are holding the largest short positions. Are we near a market bottom and at what price will a major short covering happen?

Resistance: $ 1412, $1422, $ 1438 Support: $ 1354, $ 1345, $ 1325

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bearish - target $ 1354 at least Bearish - target $ 1321 Bullish - target $ 1450

Silver Technical
Silver prices dropped lower due to a strong US dollar and better than expected US Case Schiller data on home prices. Support held at $ 22.18 before silver broke higher - shy of $ 22.70 and settled at $ 22.47 (as of the time of writing). Technically, a bottom is in place but the lack of follow through buying could take silver to retest lower level again. Meanwhile, a break above $ 23.23 will give the bulls more ammo to retest $ 26.00 area.

Resistance: $ 23.19, $ 23.65, $ 25.59 Support: $ 22.05, $ 19.66, $ 19.00

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bearish - Break $ 22.00 and it is a free fall to $ 19.00 Bearish - break below $ 23.15 could see a retest of $ 22.00 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. 

29 May 2013 | Categories: Gold

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