Gold & Silver; NFP Day!
Bullion Round Up
The beginning of a new month is never dull as traders refreshed their positions and views according to the direction sets by the 3 biggest central banks. FOMC statement from the US Federal Reserve has opted for a dovish remark and surprised investors with the lack of information on “tapering” in the coming September. The US dollar index initially took a dive and as we mentioned before, central bank’s chairman and governors are all trying to talk down their currency. As of the time of writing, we see the dollar index resurgence as traders positioned to short the sterling and euro in anticipation of a dovish remark by Mr Draghi and Mr Carney respectively. However, the party is not complete without the long awaited NFP data from the US. This could yet set another firework on a quiet summer trading day. We expect volatile trading as we head to the numbers and most forecasters opted for a better than expected data. Good data could boost the US dollar higher and restart its uptrend resurgence but a bad data may well give gold the opportunity to overcome resistance at $ 1347 level. In addition, it is Friday and anything can happen as traders leave for a long holiday.
Looking into next week, we anticipate the following economic data and several speeches by Fed officials who will try to mention more about tapering. Investors remain nervous as to Federal Reserve intention and the only dissenter remains Miss Esther George. As September is just around the corner, market have priced in for tapering to happen this year. The only question is how big will the tapering be and that remains on the economic data. With a new Fed Chairman to be elected, a clear cut communication is needed. Expect thin volume and volatile price movement on any major development but we continue to see a quiet market.
Monday
- GBP Services PMI, EUR Retail Sales, US ISM non-manufacturing
Index
Tuesday
- AUD Interest Rate, EUR German Factory Orders, US Redbooks
Wednesday
- EUR German Industrial Production, AUD Employment Change
Thursday
- US Jobless claim, CNY Chinese PPI (YoY) & CPI (MoM)
Friday
- CNY Chinese Retail Sales (YoY)
Given that tapering has been priced in, the real surprise will be the delay in implementing it and if economic data deteriorates. Gold remain vulnerable as it trade in a bearish market and the corrective rebound may have stall some selling climax but some period of consolidation is needed to build a strong base before another attempt to run higher.
Gold Technical Outlook
We continue to see gold range trading after a dovish remark from the FOMC, ECB and BOE latest decision. Gold prices could continue higher with short covering and may allow bulls to retake control and test previous resistance level only if enough follow up buying allows. We will be cautious as we are heading to the end of this week with a new month ahead and a highly better than expected NFP data to be digested (or has it been priced in?).
Technically, a break below $ 1318 will take gold to retest minor support at $ 1315 and $ 1308 but a failure to hold on support at $ 1290 could seriously impair the rebound rally and downtrend resumption can continue. Only a break above $ 1340 and $ 1347 will encourage more short covering and generate more buying interest. However, we remain bearish as long as gold is trading below $ 1525 area and see a period of consolidation before resuming on its uptrend.
| Resistance: $ 1348, $ 1355, $ 1387 Support: $ 1315, $ 1308, $ 1270 |
Traders Notes: Buy the breakout at $ 1353 to
target $ 1375 area or higher. Only short gold if it breaks below $
1280 as downward resumption can continue to target $ 1210 area again.
| Short Term (1 week) | Medium Term (1-3 weeks) | Long Term (1-3 months) |
| Bullish - target 1355 / 1371 | Bearish - target 1210 | A rebound rally? |
Silver Technical Outlook
At the moment, Silver prices showed divergence and this made gold bulls rather on the edge. The white metal has tried many times to break above but the longer it takes, the harder it will be. A break below will suggest that this area will be a strong resistance but vice versae if it managed to break higher. Technically, the daily MACD has risen but continue to trade in negative territory and prices have failed to break above the upper downtrend line for three times. RSI and stochastic has also shown downside momentum - suggesting more consolidation and downside risk to come. Support comes in at $ 19.25 and $ 18.71.
We continue to
see a persistent downtrend and fear that the rebound will be short
lived. Any rallies must be sold at the moment unless it trade above $
21.60 level to give the bull a chance to recover.
| Resistance: $ 20.60, $ 21.00, $ 21.59 Support: $ 19.20, $ 19.00 |
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 $ 20.55 area | Bearish | Bullish - a potential bull run? |
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