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.
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.
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)
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.
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
|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?|
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11 Mar 2013 | Categories: Gold