Gold & Silver; End of Corrective Rally?
Bullion Round Up
The dollar index has managed to hold on to support at 81.00 levels and a bottom reversal pattern could happen in the next few weeks. This is in line with market expectation of a stronger US dollar in the month of September as tapering will most likely take place. In addition, the dollar index has lost much over the last few weeks and a recovery seems imminent to take place should other factors remain supportive. The imminent strike on Syria subsided as UN ambassadors asked for more time to collect evidence and this give good reason for a pullback in both gold and silver. WTI hit $ 112 per barrel for a while before profit taking and retracement sets in after a run up of $ 6 in the last 2 days! We expected the pullback in bullion before gold hit a high of $ 1433 and recommended investors to stay alert.
A healthy pullback in gold and silver bode well for the market. The spike higher on gold and silver with lack of follow through buying sets the ground for profit taking. Only a break of $ 1353 on gold will change the current uptrend and at the moment we favour more upside potential. As long as the following key support areas on gold hold at $ 1393, $ 1371 and $ 1353, the bulls can resume higher. Meanwhile, silver has got the following key support areas $ 23.70, $ 22.80 and $ 22.07. Gold/Silver ratio favour higher silver prices as the recent rally in gold could start to take its toll on future demand. Physical demand could slow as the buying momentum seems to have slowed down after an impressive run up from the low of $ 1180 to $ 1433. Gold continue to trade in a Bear market and we cannot ignore the fact that it is still in a mercy of recovering from the sharp sell-off. Only if the global economic situation deteriorates and central banks continuous accommodative stance stays then prices will remain well bid.
We will be mindful as its end of the week and trading month so book squaring will take place so expect more volatility today. A whole raft of new economic data next week will certainly move market and set a new direction for the month of September. It will be an interesting month with various changes and uncertainty ahead. Helmets on and good luck out there.
Gold Technical Outlook
The run up higher has been impressive given the extreme one-sided negative sentiment on the safe haven metals. Both metals put up a well-run contrary trade should an investors bought at $ 1200 level. At the moment, we are undergoing a corrective A-B-C move lower given the pullback after taking a run up to $ 1433 area. Those who are still holding on their long could look to reduce it but as long as gold managed to hold above $ 1353, it has the chance to test resistance level at $ 1500 after the corrective move.
| Resistance: $ 1434, $ 1445, $ 1480 Support: $ 1393, $ 1371, $ 1353 |
Traders
Notes: Go short only if price break below $
1353 area. Uptrend remains as long as gold hold above $ 1400 area.
| Short Term (1 - 3 weeks) | Medium Term (1 - 3 months) | Long Term (6- 12 months) |
| Bullish - target 1425/1440 | Bearish - target 1360 | Target $ 1500 / $ 1600 |
Silver Technical
Outlook
A sharp top reversal pattern sets in after an impressive run to $ 25.15 and prices are now pulling back to find support. The Fibonacci retracement from August low to recent high at $ 23.70 (23.6%) is minor support for now. Silver could still pullback as the MACD shows further room to consolidate and the RSI is heading lower after failure to reach higher despite higher prices. Given the increase interest in bullion again, silver may well have more rooms to the upside but pullback is necessary. Investors should consider re-entering the market around $ 22.00 area to go long.
| Resistance: $ 25.12, $ 25.40, $ 26.79 Support: $ 23.70, $22.80, $ 22.10 |
Traders
Notes: Short on a break of $ 23.60 target $ 23.20, $ 22.80 and $
22.60
| Short Term (1 - 3 weeks) | Medium Term (1 - 3 months) | Long Term (6 - 12 months) |
| Consolidating | Expect consolidation to retest support at $ 22.70 | Bullish - a potential bull run? |
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