Gold & Silver; Disappointing!
Bullion Round Up
Cyprus banks have re-opened for business after truckloads of Euros replenish the ATMs. There was no disorder or stampede of large crowd, but a rather orderly queue as they get on with their everyday lives. The media seems to have overplayed the severity of a possible unrest. Given how calm the queue is, gold lost some of its allure as safe haven. Asian stock market resumes higher, alongside with European and American stock market. Losses made yesterday reversed and the Dow industrial index and S & P 500 continue to rally and set sight for a new all-time high.
The strong US dollar index continues to impose restriction on higher gold prices. The index rose to as high as 83.39 and maintains a strong footing above 83.00. It is becoming more apparent that the inflow of money to US dollar index (as safe haven bids) but also on US equities is purely because of investor’s perception. They perceive that only the US economy is on a path of recovery and it is the only place where a return on their investment can be made compared to Europe and Asia. However, we do not think that this process is necessarily healthy or permanent. We felt that it may soon create imbalances in the global economy as we see weaker Europe that may soon drag down the US economy.
We felt that the rally in US equities will soon wind down and future economic data may not paint a better picture as the automatic cut starts to really kick in. The media spotlight may soon leave Cyprus and head to Italy but as we mentioned in our last commentary, Cyprus bailout programme will continue to linger and haunt the Eurozone.
Gold bears seem relentless on pushing prices lower. In the last 2 days, we witnessed strong buying interest from the low of $ 1589 and $ 1591 area (20 DMA). However, the strength in gold prices soon waned and selling pressure take over as soon as the gold price hit above $ 1600.00 psychological level. As we approach the end of Q1 and a long weekend, traders look to lock their profit and square off open positions. We expect a risk-off trading sentiment and volatile price swing in a thin market.
The worse than
expected US economic data did not help gold to move higher. Instead,
there was a sudden sell off at 1300 GMT which drags gold to a low of
$ 1595.50. Technically, gold continue to battle above the 20 DMA and
remain vulnerable to further selling pressure. The Fibonacci
retracement support from the low in March to the high, show support
at $ 1595, $ 1589 and $ 1582. A break below $ 1589 may well drag gold
to retest its previous $ 1575 area.
Long gold at $ 1620.00 target $ 1630
with a stop loss at $ 1611.50.
Long gold at $ 1592.50 target $ 1618 with a stop loss at $ 1575.00 - In Progress
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1592, $ 1584.86, $ 1580.39, $ 1522 (2012 low)
Once again silver proved to be a problem child as we witnessed another bout of selling. During the Asian trading times, silver was bid up and prices managed to maintain above $ 28.70 area but as we enter the US market, the selling begins again. Silver has not been able to hold on to the gain made yesterday which was extremely disappointing.
We have made in our
previous commentary that we will not get carried away due to a
dominant US dollar which continues to cap any rallies and we have on
many occasion repeat caution of any silver trade. Unless silver can
trade above $ 29.50, we will remain bearish and felt that there is
too much volatility (and non-volatility) to take a position.
We felt that silver is set to break lower and may soon retest support at the previous low of $ 27.93. The daily chart shows the stochastic fast line bearing lower while the MACD remains stuck in the negative zone.
Long silver at $ 29.40 target $
29.80 with a stop loss at $ 29.15
Short Silver at $ 28.15 target $ 27.90 with a stop loss at $ 28.25 - Profit
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.00, $ 27.93, $ 27.50
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