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Gold & Silver; Cheap Paper Money


Source: Hedgeye

 

Central bankers are facing the most difficult task – balancing the economy which is on the verge of deflation or pumping it with cheap money to reflate the stitch up economic bubble. Worryingly there is no other option at hand and more negative interest rates in developed economies are looking likely in the coming months (especially in Europe). Meanwhile, the US economy (dubbed the Promised Land) continues to spur on the relentless task of spearheading growth and potentially raise interest rate for the first time. Analysts reckon that the BOE is running second on this issue too.

 

The big question that many precious metal investors had in mind is when will we see the trickle down event starts going into commodities again? To be fair, the last Precious Metal Bull Run was on the back of cheap money printed by the US government and this QE baton has been passed and replicated elsewhere such as Japan, China, Russia and Europe. Precious metal prices in other currencies have managed to make all time high and will continue to do so for a while. The momentum in XAU/USD looks ominously lower as the Fed looks to tighten in 2015. There is no denying that it will eventually happen and trading XAU below $ 1050 is looking more likely.

 

The next few months will be crucial for the US dollar and stock market bulls. 2015 has been a promising year for more than just a black swan event and at the speed it is going, it looks like there are MOAR around the corner. Gold Technical Outlook

Weekly Chart

 

Gold registered a low at $ 1142.67 and bears continue to hold the upper hand. Only a break and close above $ 1195 will neutralise our view but anything below this are selling opportunities. Weakness in USD gave rooms for short covering and current price action suggests a pause by the sellers. This week, we will see a higher rebound of sort but wary of this bear trap!



Trade: Adding more short at $ 1196 with the stop changed to $ 1206. Valid for this week only.

 

Contract

Valid Date

Price

Action

Stop Loss

Target

Results

XAU

23rd – 27th Feb

1206

Closed

1248

1189

+17

XAU

23rd – 27th Feb

1211

Closed

1248

1177

+34

XAU

23rd – 27th Feb

1215

Closed

1189 (1248)

1152

(1160)

+63

XAU

16th – 20th Mar

1178

Live

1206 (1196)

1150

XAU

23rd – 27th Mar

1196

Order Placed

1206

1130

 

20 WMA

50 WMA

100 WMA

1209 (+/-)

1248 (-3)

1282 (-2)

 

Silver Technical Outlook

 

Weekly Chart

 

Silver bears lost its mojo despite being so close to break previous low. US dollar weakness (losses) was the main reason for a counter trade as investors start to cover their shorts. Overall trend remain bearish but current price action suggest a period of consolidation as previous low remains the potential target. Meanwhile, development in the currency market will give us more clues to the next possible direction on this trade.

 

A bullish engulfing candlestick on the weekly chart will give time for both bears and bulls to mull over. In addition, the WMA (see table below) has also lose its bearish momentum and further short covering could neutralise it. Despite that, we maintain our view that this rally is an opportunity to build on short positions.

 

Trade: Our Short silver position is looking less favourable thus we look to change our target. Any opportunity to close at breakeven is highly advised. Valid this week.

 

Contract

Valid Date

Price

Action

Stop Loss

Target

Results

XAG

23rd -27th Feb

16.70

Closed

16.70

16.10

0

XAG

23rd -27th Feb

16.80

Closed

16.66

(16.80)

15.55

+125

XAG

16th – 20th Mar

15.95

Live

16.35

15.80 (15.30)

 

20 WMA

50 WMA

100 WMA

16.52 (-4)

17.31 (-8)

18.59 (-7)

 

4 Hour Chart – Short covering rally but with a potential to build a short term bullish scenario.

 

Monthly Chart – Watching the long term trend line acting as support for now at $ 14.65 and rising. The big question is what IF it broke lower?

 

Platinum Technical Outlook

Weekly Chart

 

Weekly low registered at $ 1086.20 and with the market trending lower, we cannot rule out lower prices in the near future. Daily Chart shows a compelling trend lines and on this basis, only short covering action will allow the market to test the upper trend line between $ 1143 to $ 1148 areas. In addition, the daily 20 MA will act as 1st resistance where sellers will prevail. Bears are still in full control and we felt that Platinum will further consolidate but any rallies are selling opportunities with a potential target of $ 1050 for long term support.



Trade: Short at $ 1147.50 with a stop at $ 1152 and target $ 1090. Valid this week only.

 

Contract

Valid Date

Price

Action

Stop Loss

Target

Results

Pt

09th -13th Mar

1155

Closed

1150

1172

-5

Pt

23rd – 27th Mar

1147.5

Order Placed

1152

1090

 

20 WMA

50 WMA

100 WMA

1201 (-6)

1322 (-6)

1374 (-4)

 

Daily Chart – Notice the Trend Line. We expect prices to continue in this trend.

Monthly Chart – Potential setup for a period of short covering but aware that upside remains capped.

 

Palladium Technical Outlook

Weekly Chart

 

Last week we covered Palladium with the following take “…bearish scenario happens only if prices continue in this selling phase. A break and close at $ 773 will give the bear further impetus to take prices to test the lower Bollinger Bands at $ 754.39 (as of the time of writing). Pullback to the lower range of the trend line at $ 755 area may give investors an opportunity to buy in.

Palladium bounced off the lower Bollinger Band after hitting a low of $ 754.20. Other indicators are pointing to more selling next week and only a move above $ 788 will help neutralise the current weakness. However, the long term view and upside looks capped and we are biased to see more consolidation before Palladium make any significant move. We favoured a period of range trading with a downside risk.



Trade: Risky short at $ 793 stop at $ 801.50 to target $ 760. Valid for this week only.

 

Contract

Valid Date

Price

Action

Stop Loss

Target

Results

Pd

23rd – 27th Mar

793

Order Placed

801.50

760

 

20 WMA

50 WMA

100 WMA

788 (-1)

811 (+/-)

769(+2)


Weekly Chart – Current range is at risk of rollover – break and close below $ 750 opens the gate to retest $ 726

Monthly Chart – RSI just managing to hit 50 while other indicators are showing more weakness. Upside capped at $ 908.00 but anything higher then look for a new ALL TIME High.


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.

20 Mar 2015

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