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Gold & Silver; Data Oriented

Bullion Round Up

At the beginning of this week, we have highlighted in our previous commentary the importance of the up and coming economic data that could well set the tone of the US dollar index and how it will affect the price development in Gold and Silver. Given the constant coverage of the Federal Reserve clear intention to taper asset purchase programme or QE, investors are keeping a close eye on this week US employment data. Thursday US jobless claim data could provide more clue to the state of the labour market but the key data lies on Friday Nonfarm payrolls data with an expectation of 170k jobs to be created against 165k. Several Fed officials have made clear that as long as more jobs are created or in line with their 200k expectation, they expect the tapering of asset purchase programme to start as early as September this year.

There was a glimmer of hope on this week EU manufacturing data that came in at 48.3 against expectation of 47.8. Yes, the numbers remains under 50.0 and still in contraction but it is one step in the right direction. The recent cut in interest rate by the ECB as well as discussion to implement a negative interest rate certainly helps to weaken the Euro currency. UK manufacturing PMI data also show growth at above 51.3, giving the sterling a boost higher. However, it is not all good news as the US Manufacturing index suffered its first miss and contraction as the data came in at 49.0. We felt that the recent rise in the dollar index could be a factor as it was a lot stronger against many other currencies - thus affecting economic data out from the US.

Our short term outlook remains unchanged at the moment. The next direction on gold and silver remains data orientated and we stand by our previous short term outlook on gold remains murky as prices trade in the range of $ 1380 to $ 1420. It is becoming a repetitive ritual that one must short gold if it re-enter or break above $ 1400. The short sellers have interest to do so and this indicates that a break above $ 1425 will encourage more short covering. On the other hand, a break below $ 1380 could spell trouble and selling pressure could increase again. The risk to the downside remains but short term trading favour a higher gold price. If the situation permits, a weaker dollar index, correction in equity, increase uptake on ETFs product and with a decent physical demand may help gold retest resistance at $ 1424 area. However, our long term projection is to see this small rebound to falter and gold to retest previous low at $ 1321 or even lower.

Gold Technical

Gold started the day on a positive note as prices trade at $ 1408.00 but the same repetitive action got underway as Europe starts trading. Prices retraced lower again and retested the uptrend line (see below chart) at $ 1395.00 before spiked higher to $ 1410.00 on the back of the US ADP job numbers that came lower than expected. Technically, the market shows exhaustion and the bull could be on the last straw as it failed to put in with higher close. Failures to break pass $ 1424 and lower high has set gold prices to trade in a converging trend line. A breakout looks imminent and with the current situation, we favour the downside.

Looking forward, a short term rally in a bear market is to be expected. Another bout of short selling opportunities is in the making and we would not be surprise that resistance at $ 1487 will be strong.

Resistance: $ 1416, $1437, $ 1438 Support: $ 1384, $ 1373, $ 1325

Traders Notes: Longs are taking positions at $ 1391, $ 1398, $ 1400, $ 1406 and $ 1414 with a stop loss ranging from $ 1373, $ 1385 and $ 1390 area. Profit target sets at $ 1410, $ 1424 and $ 1460 area.
Shorts are taking positions at $ 1404.50 and $ 1420.00 with a stop loss at $ 1425 area. Profit target is sets at $ 1400 and $ 1395 area.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bullish - target $ 1425 at least Bullish - target $ 1460 Bearish - target $ 1280

Silver Technical

The silver market reaction was similar to gold. It managed to find support, creating a higher lower but lower high with two converging trend lines. Breakout is all imminent and we favour the downside at the moment. Technically, it has got rooms to move higher but it could continue to trade in this range of $ 22.00 and $ 23.50. Only a break above $ 23.35 will it encourage the bears to do more short covering.

Resistance: $ 23.19, $ 23.35, $ 25.59 Support: $ 22.37, $ 19.66, $ 19.00

Traders Notes: Longs are taking positions at $ 22.40 area but with a wide stop loss at $ 21.75. Potential profit area comes in at $ 23.20 area and others are targeting higher numbers.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bullish - Break $ 23.19 Bullish - Retest $ 24.50 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. 

06 Jun 2013 | Categories: Gold

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