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Gold & Silver; Breakout - Short Covering

Bullion Round Up

Global equities consolidate its recent gains after rushing higher on the back of better than expected data from the US as well as the potential of no “septapering” by the Federal Reserve. Oil rose and on course to break higher after report of supply disruption. Meanwhile, gold prices trade in range but silver is struggling to break higher despite a weaker US dollar index and better economic data. After last week busy schedule, the market could consolidate this week and book squaring could be in the cards as we approach the end of July. Economic data that we are looking out this week are - US Existing Home Sales, Core durable goods, New Home Sales, Chinese HSBC Manufacturing PMI, Eurozone Manufacturing and Service PMI. We continue to monitor how these data may affect the dollar index and global equities.

Bullion prices are trading in a bear market but recent price action shows strong rebound after a low at $ 1180.00. Short covering as well as bargain hunters pushed prices to retest above $ 1323.00 but various resistance lies ahead. Given the buoyant rise in global equities and the reduction of economic crisis, gold and silver continue to break lower and divested. ETFs outflow has been one of the biggest factors as hedge funds and money managers look elsewhere for better yield. Investors’ confidence has been badly hit but many are still holding for the long haul. Jim Rogers and Marc Faber called for lower gold prices but they maintain that they look to accumulate the physical metals and not to sell. It is a continuous debate as gold prices deviate from other correlations that used to affect it but we feared that it will continue to trade in a bear market. Gold advancement has been tapered and the previous bullish sentiment has been tamed to such an extent that this correction could drive prices to a potential low of $ 1100.00 per ounce.

Gold Technical

Given the recent movement in the gold and silver market, we are maintaining our view as follows.

As per our commentaries made previously, 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.

Resistance: $ 1338.80, $ 1350, $ 1387 Support: $ 1302, $ 1270, $ 1208

Traders Notes: 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.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bullish - target 1325 / 1338 Bearish - target 1155 A rebound rally?

Silver Technical

With a weaker dollar index and a breakout in gold, silver prices gained in the early Asian trading hours. Silver found support at $ 19.27 and now trying to knock above the psychological level of $ 20.00. However, we continue to see a persistent downtrend and fear that the rebound will be short lived. Any rallies must be sold at the moment unless it trade above $ 21.60 level to give the bull a chance to recover.

Resistance: $ 20.30, $ 20.44, $ 21.59 Support: $ 18.20, $ 18.00

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

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bullish if can break pass $ 20.35 area Bearish 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. 

22 Jul 2013 | Categories: Gold

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