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Gold & Silver; Lack of Conviction

Low volume and lacklustre price action has kept gold and silver prices within a tight range as traders are waiting on the side line for further news. Not only is it lack of conviction from either camp, the lack of direction frustrates traders to hold on to their trades. Technically, another low was made and sellers take cover due to continued weakness in the US dollar index. Equity markets have not seen better days as it yo-yo up and down. Threat of US government shutdown by the 17th October seems imminent and further discussion among politicians will be the main headline. Talks of tapering in October are nonsensical given that the last FOMC conference of keeping $ 85 billion QE programme will take time to work. Changing their view within a month shows lack of competency among existing Fed members and the market will question it. We expect prices to break below $ 1300 on the continued bearish sentiment towards the yellow metal. However, expect increase volatility as the market brace for the result on US debt ceiling that could throw out a few surprises.

Gold Technical Outlook

Daily Chart
The current price action has unwound previous kneejerk reaction post FOMC statement and back to square one. Prospect of tapering has capped the upside and gold faced strong resistances. Technically, a bearish head and shoulder formation could form with a neckline at $ 1278 area. Should gold break below $ 1275, previous low at $ 1180 seems highly probable. On the other hand, there is a small possibility to retest resistance level at $ 1345 to $ 1355 area but expect strong resistance. Political instability in Italy and the US debt ceiling could fuel another small rally but Edward Meir of INTL argued that it will be a short span before selling continues. At the moment, patience while trading in the trendless market is the best advice.

Resistance: $ 1415, $ 1455, $ 1525 Support: $ 1278, $ 1210, $ 1180

Traders Notes: Short only if it break $ 1290 level. Going long on a break above $ 1380 - the target will be previous high.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6- 12 months)
Bearish target $ 1210 Bearish - $ 1180 Bearish

Silver Technical Outlook

Daily Chart
A bottom price action often takes longer to form and there is an argument here that the silver price action could form a W double bottom reversal. The argument is only viable if the price managed to trade above the support at $ 21.20 area and retraced to overcome resistance at $ $ 23.50 area. However, analyst from Commerzbank argued that the white metal corrective rally has ended and the revisit to previous low at $ 20.00 is possible now. The current trendless market left many uncertain to commit in either direction but both arguments are valid. We favour continued weakness in the next few weeks but cautious on any surprise on gold price action.

Resistance: $ 23.45, $ 23.90, $ 24.53 Support: $ 21.25, $20.80, $ 19.50

Traders Notes: Looking to short if it break and close below $ 21.30. Buy at $ 20.35 for a potential corrective rally.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6 - 12 months)
Possible retest of $ 20.60 area Bearish $ 20.00 area 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. 

27 Sep 2013 | Categories: Gold

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