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Gold & Silver; Bouts of Consolidation


News on the street continues to sounds rosy, especially the US economy outlook with a stronger dollar and backed by strong economic numbers. However, we continue to decipher those numbers with reality. Strong global equities maintain the mantra that central banks will continue to prop the economy. What most do not see is the debt incurred just to do so and how painful it could be in the long run as this continues on. Just take how the ECB has to twist their policies and install a large QE for the whole Eurozone. As we wrote this report, French Finance minister is cajoling up with Greece Finance minister for a debt renegotiation which Miss Merkel will very much welcome.

Meanwhile, the rich will continue to be protected from any changes as they will continue to get richer. Wealth inequality will play a significant social economic change – where the picture is not so rosy then. Bankers are taking note and shifting great amount of money to take advantage of cheaper currency exchange or wealth protection strategy as central banks around the globe continue to surprise. As we kick off the month of February, we are thinking various unlikely scenarios that could happen – such as long term low oil prices or how the equity market could be correlated with how the oil prices react.

Gold Technical Outlook

Weekly Chart

Wild reaction from last week’s economic data has caused gold prices to pullback as anticipated but the reaction of further buying as we close the week was a tad unexpected. Is this a sign of a resilient bullish move as Hedge funds and long speculators piled in further in safe haven assets? Are they expecting a selloff in the equity market or see more uncertainty in the upcoming economic indicators from the US?

The weekly chart continue to paint a descending triangle formation but there is a second possible scenario where short term prices could be well supported and test higher numbers. Our biased view is that the current short term upside is limited with a higher downside risk, thus shorting the yellow metal is a much more favourable bet. Only if price managed to break and close above $ 1308 then expect further upside to test resistance at $ 1344, $ 1387 and $ 1428 area.

Meanwhile, a retest at $ 1257 could not be rule out this week and a break below $ 1251 will give way to test support at $ 1244 and $ 1225.


Trade: Last short contract from $ 1296 continue with a stop at break even and previous target at $ 1245 is now changed to $ 1267. Possible buy for this week if price pullback to $ 1221 area with a stop at $ 1209 to target $ 1236 and $ 1247 area.

20 WMA

50 WMA

100 WMA

1218 (+3)

1266 (-1)

1303(-3)

Silver Technical Outlook

Weekly Chart

As feared, our outlook on the white metal is spot on except on the trade recommendation due to our disciplined but rather timid nature to trade this volatile contract. Last week commentary states “There is a continued risk that Silver prices could retest previous low and current resurgence may not last. We see a gradual retest of the breakout from the long term trend line at $ 16.10 and should prices break below that then further selling will resume. In the meantime, Silver prices will bide it’s time to retest several previous resistance now support areas.”

Last week pullback hit support at 20 WMA $ 16.78 areas – give and take with a low marked at $ 16.73. Weekly RSI shows rejection at 50 and the stochastic shows further selling could be in the cards.

 

Trade: Trade only valid this week to short Silver should it retest $ 17.60 with a stop loss at $ 18.10 to target $ 17.15 then $ 16.85 and if allowed $ 16.25 area.

20 WMA

50 WMA

100 WMA

16.78 (+17)

17.93 (+/-)

19.12 (-4)

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. 

03 Feb 2015

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