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Gold & Silver; Buckle Up!

Bullion Round Up
It has become a repetitive mantra as we witnessed a positive buying from Asia that soon dissipates as we enter the European trading hours. The turbulent price movement did not stop there as bullion investors have to face a gruelling mental test when US market open.

Physical buying picked up in Asia - investors felt gold is cheaper and offer a better return as their stock market suffered from the economic uncertainty in the Eurozone as well as the US sequester that failed to reach an agreement. China shares took a beating, with property shares worst hit after an official announcement from Beijing to cap prices. The curb includes higher down payment and mortgage rates for buyers of second homes. It is completely different picture from their western counterparts (except the Eurozone) who are enjoying a more buoyant stock market rally.

Meanwhile in Europe, we are looking at a potential crisis in the making. This time, it is a political crisis that may revive the dormant economic crisis (especially after Mr Draghi famous line will do “whatever it takes”). The messy Italian election did not help the 10 year Italian bond yield that is on the increase. Media coverage on the election issue has helped to divert attention from a higher Spanish unemployment rate as well as the weaker Eurozone Sentix investor confidence that drop to -10.6 against -3.9 previously.

If we bring together all of the above into a big picture, that picture is starting to show a complete contrast to what was being proclaimed by politicians that the market is recovering and growing. We warned in our previous commentary that the global economy remains fragile and over dependant on the US as well as China. We are witnessing stronger US dollars due to safe haven demand and also due to currency devaluation from other countries that are playing catch up with the US. We cannot ignore the fact that there will be more quantitative easing to further support the fragile economy and currency devaluation that will pick up over time.

Gold Technical

Short Term:
Prices are capped to the upside of $ 1585.00 and unable to break the (38.2%) resistance level of $ 1587.00. It does not paint a bullish picture as any rally is short lived. Gold has been trading in a tight range of $ 1585 and $ 1570 where it found some support. The Bollinger bands are converging, indicating a possible breakout. Low volume also indicates a lack of interest which could encourage the bears to apply more pressure in the short term.

Medium Term:
On the daily chart, the Bollinger bands continue to move lower which may suggest that the bear run is still intact. Gold may need to retest quality support before making a strong and sustainable reversal. With managed funds and retail investor’s large speculative short positions, we will not be surprise if a higher gold price may force short covering. That may be the positive catalyst that gold needs to move higher.

We will short gold at $ 1555 with a stop loss at $ 1565 and target $ 1540. Should the selling overextend itself, we look to place a buy at $ 1530 with stop loss of $ 1525 and target $ 1550.
Resistance: $ 1587, $ 1592, $ 1625 (50%), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1564, $1555, $ 1545, $ 1525, $ 1522 (2012 low)

Silver Technical

Short Term:
The white metal showed a more promising sign as prices traded between $ 28.82 and $ 28.51. It is still trading above the 38.2% retracement line that lent support but it lacks direction. The lack of economic data on Monday dampens any interest and volume was low. However, the bulk of the economic data is at the end of this week which may create some momentum on silver.

Medium Term:
The MACD remains in the negative zone and the fast line has not cross higher. Prices are still trading below the 20 DMA that is proving to be a tough resistance line. We felt that there is more room to consolidate and silver may need to retest quality support before we can be more bullish.

Short silver at $ 28.45 with a stop loss of $ 28.55 and target $ 28.15. Looking to buy if $ 29.15 is given and place a long trade to target $ 29.50.
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 27.93, $ 27.50


Currencies Value Change comment
Euro 1.3009 Euro is weaker after several rumours that S and P may downgrade Italy.
AUD 1.0161 Aussie dollar continue to weaken as China look to tighten their property market.
JPY 93.25 Mr Kuroda outlines the easing programmes but the market is now waiting for his action.
US Index 82.26 US dollar index resilient and take out previous resistance level. Safe haven buying on the US dollar.

Trade Recommendation Results - February 2013

Over the month of February, we have recommended several short positions both on gold and silver. Below is the result of our recommendation as well as the stop loss triggered. We hope our readers enjoyed reading our daily bullion round up and benefit from our trade recommendation.

Gold Results

Date In Date Out Change Notes
12th Feb 1652.00 15th Feb 1638.00 14.00 Short gold
15th Feb 1625.00 18th Feb 1615.00 10.00 Short gold
19th Feb 1605.00 21st Feb 1600.00 (5.00) Stop Loss SL triggered - Long gold
25th Feb 1585.00 27th Feb 1600.00 15.00 Long gold

34.00 profit

  • Shorting the market is more profitable
  • Cautious view for the next few weeks
Silver Results
Date In Date Out Change Notes
7th Feb 31.60 12th Feb 31.02 0.58 Short Silver
19th Feb 29.60 20th Feb 29.30 0.30 Short Silver
20th Feb 29.20 21st Feb 28.90 0.30 Short Silver
22nd Feb 28.75 25th Feb 28.60 (0.15) Stop Loss SL triggered - Long Silver

103.00 Profit

  • Shorting the market is more profitable
  • Trading the white metal cautiously
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.

05 Mar 2013 | Categories: Gold

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