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Gold & Silver; Further Weakness Ahead

Bullion Round Up

In this article, we would like to just remind our readers that gold and silver remain susceptible to further weakness. Both are trading in a bear market and short sellers have a strong interest to keep prices sustain at lower prices. In addition, many positive news and other elements have not help to spur a rebound rally that is worthy of writing. Rebound rally on both metals have been weak, short term and rather speculative. First there is the lack of demand from investors in the physical market ever since the April sell-off and we continue to see outflow from gold backed ETFs. Second, the US economy is on a recovery path but mixed with hurdles such as sequester, ailing Eurozone economies and a possible slowdown in China. Third, alternative investment can provide better yield elsewhere as the risk of higher inflation subside and the diminishing chance of a global crisis happening also reduce the need to hold safe haven assets.

Given that the current scenario favours lower gold and silver prices, investors are prone to sell and liquidate their long positions. There is no telling how low prices could go before it is considered a bottom but several analysts call for $ 1307 / $ 1301 and break below that a revisit to $ 1285 is a possibility. Citi analyst Tom Fiztpartick calls $ 1260 as a potential target in the medium term. Others have been more aggressive with their bearish view with gold reaching $ 1150. All of these are possibilities as long as the current negative sentiment remains in force. Owning gold and silver in 2013 has been a dismal choice as the financial year started with the FOMC tapering talks, low inflation numbers as well as asset reallocation. Physical buyers continue to wait on the side line for lower prices and it is evident from the recent lack of interest from Asia.
Our short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

Gold initially rose after touching a low of $ 1361 and managed as high as $ 1376 before the release of the FOMC statement. Prices broke lower post FOMC despite no talks on tapering as the Fed continues its $ 85 billion QE programme. Market reporter from Bloomberg argued that the market has over-tapered and some got disappointed as there were no mention of tapering (i.e. how much and when?). As long as gold trade below $ 1395, the bears continue to dominate and the lack of strong buyers could soften prices further. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower. Otherwise, we felt that a major short covering could be on the cards if the price is right.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1355, $ 1337

Traders Notes: Short gold as it breaks trend line at $ 1390 / $ 1395 with a target at $ 1361 / $ 1355 - stop loss stands at $ 1403 / $ 1425

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bearish - target $1341 Bearish - target $ 1321 Bearish - target $ 1280

Silver Technical

Surprisingly silver held at support $ 21.52 and $ 21.43 but weakness in the price look set to continue at the moment. There is no escaping from the sellers as Silver traded lower as selling pressure continues to mount. A weak start to the week as silver made lower high and lower low with most trading contain in the range of $ 21.00 to $ 22.50 area. There were no strong buyers at this price level, instead most are short term speculators dip buying on the market and sell when it spiked higher. Investors favour lower silver prices and we may continue to see it weaken before any rebound rally.

Resistance: $ 22.51, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00

Traders Notes: Stay on the side line.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bearish momentum 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.

20 Jun 2013 | Categories: Gold

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