Gold & Silver; Directionless
Bullion Round Up
The latest BOJ press conference further instil confidence that monetary easing that was recently embark is to stay for the long haul. There was concern about Japanese Government Bonds (JGB) where yields have been fluctuating higher. At the moment, questions were raised if Mr Kuroda is able to communicate effectively to investor with regards to his tolerance on JGBs percentage yield. The JPY has strengthened in the last few days and the Nikkei continue to plummet. Mr Kuroda added that target inflation of 2% is to stay and the trickle-down effect from the QE will be felt in the coming months. Exporters cheered at the prospect of a weakening JPY and recent poll suggested that Mr Abe popularity has increased as he plans to open up Japan protected (inefficient) market and pledge to increase wages to reach the inflation goal he has set out. This is truly Abenomics at a massive scale and we hope it works because the consequences of failure will be dire.
US dollar index continue to trade above the $ 83.50 level post Bernanke speech on tapering QE programme as early as June. DYX have enjoyed the strong rally ever since the talk of reducing the money printing programme. Meanwhile, US stock market remains resilient despite the weakening in European and Asian stock markets. Hedge Funds continue to be bearish on the outlook on commodities as China look to change their stance of maintain high growth. Europe continues to struggle with economic growth while US is barely out of the woods.
Most of the traders we approach are placing higher short positions in the range of $ 1405 to $ 1418 area with a tight stop loss at $ 1425. A break above $ 1425 could give the bulls some encouragement to retest $ 1440 at least. Meanwhile, a break below $ 1370 will add selling pressure that the short covering has ended and the downtrend continues. If that was the case, we anticipate a full retest of $ 1325 and possibly a new low. We will not comment on silver as the white metal is far too volatile.
With a weaker US dollar index, gold should be able to rally and break the psychological level of $ 1400. It has failed on several occasions, thus indicating that there is strong selling pressure. Meanwhile, gold managed to find support at $ 1337 and $ 1357 where buyers pushed the prices higher. We would like to point out however; the increase in price (or rebound) remains questionable. This is because the price increase in a falling volume usually indicates that weak hands are buying. We continue to see weakness in gold as ETFs outflow continues and physical buying will not be sufficient to support the market.
|Resistance: $ 1412, $1422, $ 1438 Support: $ 1354, $ 1345, $ 1325|
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bearish - target $ 1324 at least||Bearish - target $ 1280||Bullish - target $ 1450|
To trade the Silver market, one either has a good heart or a very deep pocket to sustain the whipsaw we witnessed yesterday. Prices plunged at the opening by $ 2 dollars per ounce, hitting a low of $ 21.19 before a quick recovery. Bloomberg reports that only 3000 contracts were traded but the thin volume was sufficient to take the price down. We fear that the selling will continue and media report the lack of industrial demand from China and Europe may have decreased the need for the white metal.
|Resistance: $ 23.19, $ 23.65, $ 25.59 Support: $ 22.05, $ 19.66, $ 19.00|
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bearish - Break $ 22.00 and it is a free fall to $ 19.00||Bearish - break below $ 23.15 could see a retest of $ 22.00||Bullish - a potential bull run?|
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28 May 2013