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Gold & Silver; Dead Cat Bounce!

Bullion Round Up
Some of our readers would argue that it is too early to suggest a Dead Cat Bounce scenario simply because the rebound has got more rooms to the upside due to an unprecedented physical demand. Technical analyst - Jamie Saettele argued otherwise as he went through briefly that “gold didn’t quite make the new low, stopping at $ 1336.15 before embarking on the larger rally.” He added that for a new low, gold may retest the 2011 low at $ 1307.45 and expect strong resistance at $ 1459 on the current rebound. We share the same technical view that the current rebound has got an expiry date and would like to take this opportunity to caution investors that another sell off could be in the horizon.

The current rally is well supported by strong physical demand from retail investors as well as Central banks buying. Retail investors look to diversify from holding paper gold to physical gold. Rising demand for allocated gold accounts confirmed the argument. Meanwhile, central banks continue to buy and add to their holdings. The selloff in gold encourages additional buying from the likes of Russia and Kazakhstan central banks. However, gold back ETF continue to see outflow and look set for the largest monthly decline since trading began in 2004. Despite that, the unprecedented physical demand may have start seeping in and influence the market price. In addition, Bloomberg reports that some Fed members are reassessing the current economic situation. Those who once urged to reduce the asset buying have instead changed their stance and would like to see a continuous $ 85 billion quantitative easing until the end of 2013.

Once again, we would like to stress that economic data and indicators have not given gold any edge or catalysts in the last few months. Many times, gold has failed to react on additional stimulus from BOJ, Cyprus bailout instability as well as bad US data. There should be a new correlation to define what may influence the current gold price. We have yet to find one but the strong physical demand may just be a one off.

Gold Technical

The better than expected UK GDP numbers pushed sterling higher while the US dollars came under pressure. Gold took full advantage and rose higher to $ 1458 on the back of central bank demand for gold and wave of short covering. Today, we are expecting US GDP numbers which is expected to come in at 3.0%. Investors will be cautious since the last data came in worse than expected. We expect the market to remain stable as traders are more likely to wait on the side line. Gold has got more rooms to test higher if not consolidate its recent gain.

In our previous commentary, we mentioned the following - The current trading trend seems to suggest that gold could either head higher or break lower but need a significant commitment to either break pass $ 1440 or $ 1400. At the moment, gold bull won the short term battle to move higher. Our only worry is when this rally starts to stall and investors will start asking if a top is near. We fear the top is very close now and prices could potentially break lower.

Resistance: $ 1459, $ 1466, $ 1487 Support: $ 1398, $ 1371, $ 1366, $ 1325

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Flat Bearish Bearish

Silver Technical

Silver broke higher yesterday on the back of a weaker dollar. Global stock market rose with other commodities that are recovering after many periods of selloff. The volatile metal put on a good show as it ratchet up a 5% gain from on single day of trading. Prices rose to a high of $ 24.40 and as of the time of writing sitting above the 38.2% retracement line. The next resistance sits at $ 25.04 and silver has got a lot of room to play catch up.

Resistance: $ 24.40, $ 25.04, $ 25.75 Support: $ 22.65, $ 22.00, $ 19.00

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bullish Bearish Bearish

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. 

26 Apr 2013 | Categories: Gold

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