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Gold & Silver; Friday Bloodbath?

Bullion Round Up

Chairman Bernanke finished testifying to congress and maintained a dovish remark but put in place a structure when tapering will take into account. In his structure, it will include using forward guidance more actively and at the same time reduce QE $ 85 billion programme as economic data improve as anticipated. It is clear that QE will not be to infinity and reduction will take place. In addition, he only mentioned that if the economic situation has not improved then the current accommodative stance will remain but no hint of an increase (as he previously did). Congress shared their concern on asset bubbles but Chairman Bernanke assured them that inflation remains under control and will reach Fed target of 2 %.

US jobless claim came in better than expected followed by a high jump in July Philly Fed numbers at 19.8 vs 8.0 expected. The equity markets take good data and rose higher before Chairman Bernanke testify. Yesterday we mentioned in our article “Stocks Bull” and the current trend continues as equity market rose to record high on the back of better data. Equity markets continue to play an important role as investors continue to switch from safe haven assets to better yielding assets. With that, we continue to see downside risk on bullion prices in the near future. Taking other factor into consideration, Chairman Bernanke make it clear that “tapering” deadline in September is not confirm and will depend heavily on future economic data. After a roller coaster week, today we expect market to stay calm and maintain their current gain as we head into next week.

Meanwhile, we continue to see gold prices in a corrective rebound and the short sellers have managed to keep a tight lid on $ 1300.00 psychological area. Despite that, we expect that a price breakout is imminent and we could well see that happened today. Our main concern is how the market will react in the next few days or weeks. We continue to favour the downside where gold need to retest $ 1180.00 again. However, we are aware that a break higher could still happen should short sellers start to cover before option expiry.

Gold Technical

Given the recent movement in the gold and silver market, we are maintaining our view as follows.

As per our commentaries made previously, the short term set up on gold is bullish and inherently we recommend a cautious buy if a breakout of $ 1290 is given. Prices could continue higher should it break pass previous resistance at $ 1298 and the psychological level of $ 1300. Potentially, prices could retest $ 1321 and short covering rally may push the current rebound higher. Despite that, the medium term bearish perception has not changed. Once the rebound rally is exhausted, we would strongly recommend our readers to short sell the yellow metal again. Commerzbank Bullion weekly argued that strong resistance will prevail at $ 1300 and $ 1321 area.

In the meantime, we anticipate higher prices in the short run and will sell the rebound rallies to target previous low of $ 1180 again. Below is the 8 hour chart that show divergence as the RSI has reached previous ceiling and the stochastic heading lower when prices moved higher. This is a classic case that a possible market top is in place but we will continue to monitor the movement.

Resistance: $ 1300.86, $ 1310, $ 1350 Support: $ 1270, $ 1267, $ 1208

Traders Notes: Dip buyers are cautiously buying with a stop loss at $ 1150 - buying area is $ 1180 / $ 1200 / $ 1225 to go long. Expect a short period of short covering before the market resume lower. Short sellers are looking to short at $ 1318 and $ 1330 area target remains open at the moment. Stop loss is advice at £ 1350 area.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bullish - target 1325 / 1338 Bearish - target 1155 A rebound rally?

Silver Technical

With a stronger dollar index and despite dovish remark from Chairman Bernanke, gold and silver posted weaker numbers. Silver headed lower and found support at $ 19.27 but we continue to warn the downtrend still persists and we fear that the rebound will be short lived. Any rallies must be sold but we are also aware that the market is near a bottom before it looks to consolidate in this downtrend. With gold prospect being negative, Silver prices fare no better in the short and medium term.

Resistance: $ 20.30, $ 20.44, $ 21.59 Support: $ 18.20, $ 18.00

Traders Notes: Stay on the side line. Only a break above $ 21.60 will give the bulls more ammo to retrace higher.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bullish if can break pass $ 20.35 area Bearish 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. 

19 Jul 2013 | Categories: Gold

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