Gold & Silver; Bernanke Fake Bomb

Bullion Round Up

Chinese government officials signalled their intention that no additional monetary easing is in the cards. Commodities market remains subdued after the comment and investors book some of their profit. In addition, BOE Governor Mark Carney latest MPC minute shows a strong unison among all the members to maintain the current QE programme but promised forward guidance in their last meeting. As of the time of writing, we were speculating if Chairman Bernanke might do a sequel to what Mark Carney of BOE just did. The Fed Chairman could in his testimony, promised forward guidance to calm the market that low interest rate is here to stay but talk of tapering will resume as they have made it clear that growing number of FOMC members would like that. Yes, Mr Bernanke needs to do some balancing act in his testimony and he will be under pressure from congress which could force him to be more hawkish. Tapering at this stage is worth a try and we felt that it will give the stocks market some rooms to correct itself. It will also be a statement that US economy is on the mend and the market can be less dependent on easy money. Our suspicion was shared by a Bloomberg article that Chairman Bernanke might testify as per our speculative thoughts.

Meanwhile, we continue to see gold prices in a corrective rebound and the short sellers have managed to keep a tight lid on $ 1300.00 psychological area. Despite that, we expect that a price breakout is imminent and we could well see that happened already. Our main concern is how the market will react in the next few days or weeks after this testimony. We continue to favour the downside where gold need to retest $ 1180.00 again.

Gold Technical

As per our commentaries made yesterday, the short term set up on gold is bullish and inherently we recommend a cautious buy if a breakout of $ 1290 is given. Prices could continue higher should it break pass previous resistance at $ 1298 and the psychological level of $ 1300. Potentially, prices could retest $ 1321 and short covering rally may push the current rebound higher. Despite that, the medium term bearish perception has not changed. Once the rebound rally is exhausted, we would strongly recommend our readers to short sell the yellow metal again. Commerzbank Bullion weekly argued that strong resistance will prevail at $ 1300 and $ 1321 area.

Only a break above $ 1300.00 will give the bulls more rooms to push higher and force some short covering. The corrective phase in prices may continue higher and should $ 1338.00 taken out then higher high is possible. It could also mean that gold did bottom out at $ 1180.00 (in the short term) and for now that will be key support. Meanwhile, there are many resistances at higher prices and the dollar index will play a big role to determine where prices may go in the next few weeks.

In the meantime, we anticipate higher prices in the short run and will sell the rebound rallies to target previous low of $ 1180 again. Below is the 8 hour chart that show divergence as the RSI has reached previous ceiling and the stochastic heading lower when prices moved higher. This is a classic case that a possible market top is in place but we will continue to monitor the movement.

Traders Notes: Dip buyers are cautiously buying with a stop loss at $ 1150 - buying area is $ 1180 / $ 1200 / $ 1225 to go long. Expect a short period of short covering before the market resume lower. Short sellers are looking to short at $ 1318 and $ 1330 area target remains open at the moment. Stop loss is advice at £ 1350 area.

Silver Technical

With a stronger dollar index and despite dovish remark from Chairman Bernanke, gold and silver posted weaker numbers. Silver headed lower and found support at $ 19.27 but we continue to warn the downtrend still persists and we fear that the rebound will be short lived. Any rallies must be sold but we are also aware that the market is near a bottom before it looks to consolidate in this downtrend. With gold prospect being negative, Silver prices fare no better in the short and medium term.

Traders Notes: Stay on the side line. Only a break above $ 21.60 will give the bulls more ammo to retrace higher.

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18 Jul 2013 | Categories: Gold

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