Gold & Silver; Confused FOMC
Bullion Round Up
It is becoming a norm to see more currencies devaluation across the board and it raises important questions about the true value of holding one’s wealth in cash. The inconvenient truth is it happened in emerging and developed economies as their government look at ways to devalue and promote an export oriented economy as they struggle with large outflow of easy money. US dollar index is the first place of safety as investors started to see value once again after a rather mixed FOMC statement. Tapering was mentioned but the statement showed how clueless the Fed members are about the economy.
Gold managed to hold rather well on the release of the statement as it broke higher - trying to break $ 1380 but lack of follow through and dollar strength soon overcame. Sellers came in but more short covering eventually took over. We felt that the short term bullishness favour a higher gold prices as short sellers are busy covering and took those opportunities when prices pulled back. Only a break below $ 1350 will allow more selling to dominate and could potentially trigger more stop loss. However, the gold bulls are pushing to the next resistance for a move higher - potentially to break $ 1392 and $ 1400 area. At the moment, the range between $ 1350 and $ 1380 is where prices continue to trade. A break of either side will give a stronger direction and it depends on the next set of economic data from the US.
As per our last commentary, we warned our readers on the possible US dollar strength: The US dollar index continues to weaken and a break below the technical level of 80.95 could further weaken it. Therefore, the upcoming events could provide a base for the dollar index to regain some strength. Otherwise, we expect more weakness going into Septapering period.
Gold Technical Outlook
Gold continue to trade inside the range and pullback has seen strong demand or short covering. Investors have also started to enter the ETFs gold market again which should give support and currency devaluation could prove to be the key for higher gold prices. Our only concern is a possible bullish resumption on the US dollar index and September tapering that could stop the current rally.
Only a break below $ 1270 will give the bears the catalysts to retest previous low. On the other hand, the weekly chart suggests that the current rally could end at $ 1415.00 resistance area (38.2% retracement from the high at $ 1800 to the low at $ 1180).
|Resistance: $ 1385, $ 1395, $ 1414 Support: $ 1348, $ 1318, $ 1273
Traders Notes: Flat for now. Possible breakout at $ 1385 eyes for a potential run up to $ 1404 area but traders are also looking to short metals with stops at $ 1425.
|Short Term (1 week)
|Medium Term (1-3 weeks)
|Long Term (1-3 months)
|Bullish - target 1385 / 1414
|Bearish - target 1310
|A rebound rally?
Silver Technical Outlook
white metal has remained resilient despite several attempts to push
prices lower. A better than expected economic data out from China and
Eurozone has allowed the bulls to support and aim for higher prices.
Should it pullback from here, the market will remain healthy and
allow more rooms for bargain hunters to re-enter and add on their
long positions. That is based on the assumptions that gold prices
could head higher which could then support the white metals. Given
the increase interest in bullion again, silver may well have more
rooms to the upside before the pullback.
|Resistance: $ 23.61, $ 24.00, $ 25.60 Support: $ 22.65, $22.35, $ 21.65
Traders Notes: Flat for now after stops at $ 22.65 hit from a long position $ 20.60. Looking to re enter long or possibly short at higher prices.
|Short Term (1 week)
|Medium Term (1-3 weeks)
|Long Term (1-6 months)
|Bullish target 24.55
|Expect consolidation to retest support at $ 21.70
|Bullish - a potential bull run?
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23 Aug 2013 | Categories: Gold