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Gold & Silver; Doom & Gloom!

Bullion Round Up

Very soon we will run out of ideas with our daily negative headlines! Nowadays, gold and silver news articles are constantly tagged with more and more bearish views. Unfortunately, this bearish sentiment will linger for a little longer. Goldman’s analysts are more confident to say “we told you so” as the yellow metal continue to break lower. We addressed our concern in many of our previous commentary that if gold fail to conquer the $ 1620 level then expect more selling pressure. We warned and we hope our readers take heed.

The daily chart continues to paint a resilient setup if it can mount the next resistance at $ 1616.50 and $ 1620.00. It needs to break the next resistance level of $ 1620 by early next week. If not, we fear the on-going negative sentiment will drag prices lower to retest support. We remain cautious and look to short gold - posted on 22nd March “Dead Weight!”

Diminishing macro risk continues to offset the need for safe haven metals. Over the past few weeks we have witnessed the Cyprus bailout fiasco as well as the on-going Italian election but most of these risks are downplayed. Those risks remain on the side-line as the stock market rally gave an impression that everything is well.
However, we disagree that everything is well and argued that politicians are merely kicking the can further down. We felt that the current rally in the stock market is due for a correction and think that the “sell in May and go away” situation will soon prevail.
Meanwhile, gold and silver weakness will continue with more price consolidation and a retest of previous low. Should prices managed to hold on previous lows and make a strong support, a short covering rally may lift prices higher. However, the current setup paints a rather bearish situation and we favour shorting the market should $ 1555 is given.

Gold Technical

Selling pressure continues on the yellow metal as lower prices trips stop loss order that eventually generate more selling momentum. During Asian trading hours, prices found support at $ 1563.10 and bounced higher on the back of some short covering but met strong resistance at $ 1576.67. Gold also found some support on the back of a softer ADP non-farm employment change and ISM non-manufacturing index. However, the rally is short lived despite a weaker US dollar index and light equities sell off.

The 4 hourly charts show a dead cat bounce and the selling continues in the late US trading hours. We covered in our previous commentary, that should $ 1575.00 is given we will revisit previous low at $ 1555.00. We expect strong support at this area but cannot discount the fact that gold will remain vulnerable to retest $ 1535 and $ 1525 area. The lack of any dip buying is a major concern which indicates a strong lack of interest. We fear the bears could apply more pressure even with a light amount of trading volume. With China on holiday this week, any physical buying to act as support is not on the cards.

Technically, gold looks weak and may be vulnerable to more selling pressure. The daily signal shows a weakening MACD line that could cross lower again and the stochastic fast line continue to head lower. We expect a volatile price action in the next few days given the US economic data.

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 - SL Triggered
Short gold at $ 1573.50 target $ 1562.50 with a stop loss at $ 1578.50 - Profit
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1575, $ 1561 (March Low), $ 1555 (February Low), $ 1522 (2012 low)

Silver Technical

We recommend to our readers that any silver rallies are to be sold and this advice should be taken seriously. Silver continue to trip lower and more stop loss order build a stronger selling momentum. Given its close proximity with gold, silver prices took a deeper plunge and a bottom is far from set. The next support stands at $ 26.80 and $ 26.50 before reaching previous low of $ 25.97. We continue to be bearish and look to sell on any rallies unless it can break above $ 27.75.

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.

Long silver at $ 29.40 target $ 29.80 with a stop loss at $ 29.15
Short any silver rallies
Resistance: $ 27.35, $ 27.56, $ 29.50 Support: $ 26.75, $ 25.97

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.

04 Apr 2013 | Categories: Gold, Silver

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