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Gold & Silver; Favour A Correction?

Bullion Round Up

As the prospect of intervention by western countries into Syria war escalates, safe haven commodities are in strong demand. We have seen key commodities such as crude oil rising and prices remain well supported. Meanwhile, gold and silver rallied higher on the back of technical short covering given the latest economic development in emerging countries. The three most powerful central banks continue to remain accommodative and questions were raised if the September tapering plan is viable. Emerging countries such as India, Indonesia and now Thailand is suffering from the exodus of hot money. covered in their article at how “Emerging Markets Taking Clearer Steps Towards Outright FX Wars”. We warned about our concern with the steps taken by developed economies who continue to print money and devaluing their currencies. Currency wars in emerging countries is the by product and the value of holding paper money continue to depreciate.

Strong physical demand from Asia continues to dominate the scene and support both gold and silver. Economic and political uncertainty will raise more volatility in the two metals as investors from emerging economics sought to protect their wealth and outright long wars in Syria has moved equity market around the world lower. Investors remain wary as we enter into a new month of US economic data that could sway the current direction of currencies, equities and commodities. Concern about the US debt ceiling is starting to grab media attention and all of the above uncertainties will certainly fuel more volatility in both gold and silver.

Our main concern lies with the beginning of an end to this corrective rally on gold and silver. Gold has managed to rise higher after support at $ 1270 held and advanced $ 140 dollars. Meanwhile, Silver advanced has caught many by surprise as it posted higher highs but it is also due for a corrective move lower. The run up higher has been impressive given the extreme one-sided negative sentiment on both the safe haven metals. Both metals put up a well-run contrary trade should an investors bought at $ 1200 level. The current setup calls for another impulsive move higher and then a corrective A-B-C move lower. As long as gold managed to hold above $ 1300, it has got the chance to test resistance level at $ 1500 after the corrective move.

Gold Technical Outlook

Gold continue to trade higher with strong fresh demand from investors and we have also seen interest from ETFs again. As long as accommodative stance is given, gold could only propel higher. Potential war in Syria has also fuelled the need for safe haven assets. Meanwhile, emerging countries faced severe currency devaluation and many savers opted to buy gold to protect their wealth. Our only concern is a possible bullish resumption on the US dollar index and September tapering that could stop the current rally.

Resistance: $ 1424, $ 1445, $ 1480 Support: $ 1386, $ 1351, $ 1273

Traders Notes: Flat for now. Breakout at $ 1385 eyes for a potential run up to $ 1404 area but traders are also looking to short metals with stops at $ 1425. Previous long position from the breakout has been trimmed.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bullish - target 1425/1440 Bearish - target 1310 A rebound rally?

Silver Technical Outlook

The white metal has remained resilient despite several attempts to push prices lower. A better than expected economic data out from China and Eurozone has allowed the bulls to support and aim for higher prices. Should it pullback from here, the market will remain healthy and allow more rooms for bargain hunters to re-enter and add on their long positions. That is based on the assumptions that gold prices could head higher which could then support the white metals. Given the increase interest in bullion again, silver may well have more rooms to the upside before the pullback.

Resistance: $ 25.12, $ 25.40, $ 26.79 Support: $ 22.65, $22.41, $ 21.79

Traders Notes: Flat for now.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bullish target 26.79 Expect consolidation to retest support at $ 22.70 Bullish - a potential bull run?

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. 

28 Aug 2013 | Categories: Gold, Silver

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