Gold & Silver; Capped by USD!
The US stock markets seem to skew their perception to always rally regardless of a positive or negative US economic data. The Dow industrial weekly chart paints a strong bull market after the financial crash in 2008. It has relentlessly risen higher and from the beginning of 2013, made several records high. The only pause is to catch some breath before another bout of fresh money coming in to propel higher prices. Our only concern lies on what comes next for the current rally. We felt that the sell in May and go away scenario will play out soon and we will not be surprised to see current investors riding along this bull market to start cashing in by end of April. That might be one of the catalysts for higher gold prices.
Once again gold failed to break higher despite a positive reversal day that it put on Monday. We cannot help but repeat our warning that gold remain vulnerable if it cannot break higher as momentum is waning. The danger we highlighted from our previous commentary is a return below the psychological level of $ 1600.00 and a retest of support before any further attempt to the upside.
The event in Cyprus continues to play a big part in reducing public confidence in the banking industry. Several media reported that the extra holiday undertaken by Cypriot banks are a way for the rich Russian oligarchs to siphon their money out of the country. Liquidity will soon be an issue in the small island as its citizen faced a sharp haircut on their deposits and a bleaker future. Where does one put their trust and confidence at a failing government and a failing banking industry? We think that it is a template for many others in the Eurozone to sober up and start the simple process of withdrawing what extra cash they have and put in just the right amount at € 99,999.99 to avoid any haircuts.
The yellow metal
put up an exciting day of ups and downs, range trading between the
high at $ 1602 and $ 1594.63. After the positive reversal on Monday,
gold lacks any real momentum to break higher and failed miserably to
keep above the psychological level of $ 1600.00. Gold market seems
muted after several US economic data as any rally remain capped by a
stronger US dollar index. The stock market remains buoyant while the
lack of safe haven interest will worry many gold bugs and long term
Technically, there are rooms for further price consolidation until the end of Q1. Daily chart shows the fast line stochastic pointing lower with a rising MACD that remains stuck in the negative zone ever since November 2012. The RSI remains weak in oversold territory and the only positive takeaway comes from the fact that gold traded above the 20 DMA ($ 1592.22) for now.
We strongly felt
that gold needs to sober up after months of selling and negative
sentiments. The lack of buying interest and momentum may soon be a
self-fulfilling prophecy that gold has lost its allure to the stock
market. Q2 trading period may give gold the opportunity to redeem
itself but should that fail, we foresee a lower gold price - at
least a revisit of $ 1535.00.
Long gold at $ 1620.00 target $ 1630
with a stop loss at $ 1611.50.
Long gold at $ 1592.50 target $ 1618 with a stop loss at $ 1575.00.
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1592, $ 1584.86, $ 1580.39, $ 1522 (2012 low)
The mundane trading period has extended itself from gold to the silver market as well. Silver continues to trade in a tight range and yesterday it remarkably did it between the high of $ 28.85 and $ 28.65. The overall market look deserted as traders have shifted their money and attention elsewhere. We cannot help but criticize the state of stillness in the precious metal market.
A dominant US
dollar continues to cap any rallies and we have on many occasion
repeat caution of any silver trade. Unless silver can trade above $
29.50, we will remain bearish and felt that there is too much
volatility (and non-volatility) to take a position.
Long silver at $ 29.40 target $
29.80 with a stop loss at $ 29.15
Short silver at $ 28.20 target $ 27.60 with a stop loss at $ 28.40
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.33, $ 27.93, $ 27.50
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