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Gold & Silver; In Limbo!

Bullion Round Up

After the initial sell-off post a better than expected non-farm payroll data, gold pushed higher to retest $ 1583 before settling for a modest close at $ 1575. Pre non-farm payroll data, gold prices is setup to fall lower as the stock market is roaring and sapping any rally, Fed beige book painted a better domestic demand and most bank analysts see a higher number on job creation.

Prices broke to a low of $ 1561.40 and found strong buying interest. We felt that the bears are in limbo about their current short position. They would like to see lower prices but met a strong support which eventually reverses the selling momentum into short covering. The short term chart indicates investors’ uncertainty and possible exhaustion to further short the oversold market. In addition, those who initiate the short position have considered some profit taking as we draw to the end of the week. Therefore, the initial setup for a disappointing gold number has no basis as it is already well-priced in.
Looking ahead, gold is still capped and between a rock and a hard place. At the moment, there is no strong upside momentum unless there is more short covering. We are entering a new week where gold prices will be further tested with a strong US dollar index and a roaring stock market rally. The outflow from SPDR gold ETFs continues and several analyst view asset reallocation by gold investors as imminent. They argued that a better economic data and stronger equities market provide investors with a better return than gold. Better economic data also meant Fed could taper the on-going QE and the possibility of an increase in interest rate.

We would like to maintain calm and compose in such volatile times. At the same time, we would like to encourage our readers to question the viability of the current fundamental issues. Bloomberg TV analysis found who benefits from the current stock market rally and to no surprise it is the top 1%. The recent tax increase on the rich by Mr Obama begs to the following question: Is he returning the favour via the stock market rally? With so much liquidity and money printing, we only see a rampant inflation on the horizon and that could prove the next catalyst to a higher gold price.

Gold Technical

Short Term:
The bear attempt on another assault to the downside but the bull managed to reduce the damage. The sell-off is accompanied by a huge volume, which push the RSI number lower and the MACD at its negative zone. We then see a pick-up in demand that took the overextended selling back above the Bollinger band. We are still bearish on this front and felt the onslaught may continue next week but would also like to mention the possibility that a bottom may have been created.

Medium Term:
Daily chart signal remain weak since the stochastic is still pointing lower while the MACD stuck in the negative territory. Bollinger bands continue to converge tighter and suggest a breakout is imminent. In the meantime, the 4 and 9 DMA are still trying to cross higher across the 18 DMA. We will only get more bullish once it crosses above the 18 DMA.

Buy gold at $ 1592 and target $ 1605 with a stop loss at $ 1588.50. Should the selling overextend itself, we look to place a buy at $ 1530 with stop loss of $ 1525 and target $ 1550.
Resistance: $ 1587, $ 1592, $ 1625 (50%), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1561.4, $1555, $ 1545, $ 1525, $ 1522 (2012 low)

Silver Technical

Short Term:
After the overextended sell-off, prices retraced higher above the bottom of the Bollinger band. The 4 and 9 DMA has crossed higher and suggest buying interest which could support higher prices. As of the time of writing, it is also trying to close above the psychological level of $ 29.00. Silver upside momentum may have a strong basis compared to gold.

Medium Term:
The MACD has converged and suggest a possible upward movement. In addition, the stochastic fast line remains positive and pointing higher. The daily chart show prices retested the low of $ 28.33 and found strong buying interest. We have a stop loss triggered on our short position and also have an open long position that target $ 29.50.

Short silver at $ 28.45 with a stop loss of $ 28.55 and target $ 28.15 - Stop Loss triggered.
Looking to buy if $ 29.15 is given and place a long trade to target $ 29.50 - this position remain open.
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.33, $ 27.93, $ 27.50


Currencies Value Change comment
Euro 1.2970 Better than expected US data took the shine off from the Euro.
AUD 1.0223 AUD holding on its current trading range.
JPY 95.86 Further weakening of JPY after the BOJ comments by Shirakawa, the outgoing BOJ governor.
US Index 82.82 US dollar index jumped higher alongside a record high stock market. Is this sustainable?

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

11 Mar 2013 | Categories: Gold

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