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Gold & Silver; Not so Safe-Haven!

Bullion Round Up

Gold failed to break the pivotal price of $ 1620 over the last two weeks and that raised concern. We have alerted our readers previously that gold remain vulnerable if it cannot break higher as momentum is waning. The danger we highlighted from our previous commentary is a return below the psychological level of $ 1600.00 and a retest of support before any further attempt to the upside. Given it is also the end of the month; we expect more bouts of profit taking as traders looking to square off their position.

A bailout of one tax haven country does not help to sustain gold status as safe haven.
The result of the Cyprus bailout brought calmness and certainty in the market. Another triumph and a lot for the market to cheer as negotiations among the Troika and Cyprus government avoided an exit from the Eurozone. Market rejoices with Asian, European and American exchanges trading higher numbers. What is not to like as the Troika come to the rescue of yet another ailing country that was on the brink of leaving the Euro? This creates another positive contagion that the Eurozone is to stay as one and improve market confidence for a little longer.

The Troika is trying to justify their action and huge requirement on Cyprus to pay up. French Finance minister indicate that the Cyprus economy is a casino that is on the brink of bankruptcy. However, this comes at the expense of the Cypriot’s living standards as well as many years of austerity programme. The sunny island of happy people is not so happy any more. Try telling that to the Russian oligarchs as well.

Meanwhile, there is an on-going big dilemma among bank depositors across Europe as the Troika enforces a heavy one off haircuts to Cyprus (not sure if there will be more). Bank accounts with over a 100,000 Euro will be the main victim. If bank accounts are not safe, how about physical bullion kept with your local banks? It makes owning gold and silver buried under your house sounds a lot safer than anywhere else.

Gold Technical

Safe haven appeal dwindled and the bears are back in control post Cyprus bailout news. Over the last 3 weeks, we witnessed how gold fought to rebuild base at $ 1570 and that will remain as a key support area for the bulls. March low was registered at $ 1561 before a strong recovery to break above $ 1600. We are not surprise that gold will have to consolidate after the gain of $ 55 dollars over 3 weeks and it did just that yesterday. Prices broke lower as option traders have strong interest for a gold price at $ 1600.00. In addition, the small euphoria in the Eurozone added pressure on the yellow metal.

Gold tested the 20 DMA and managed to reclaim $ 1600.00 and kept all its gain for the day. Prices remain capped due to the strong US dollar but well supported by the less buoyant stock market that reversed lower. The victim of the day is with European stocks, especially the banking sector as well as the Euro breaking lower to touch 1.283 (at the time of writing).

The daily chart continues to paint a bullish sign on gold revival after testing for support. Yesterday’s low and reverse upside gain create a strong hammer tail that may give the bull a reason to mount another attempt at $ 1620. Our main concern remains with the strong resistance at that price area where the bears have special interest to keep it low. However, we are near the end of the month and some profit taking could take place.

Long gold at $ 1620.00 target $ 1630 with a stop loss at $ 1611.50.
Long gold at $ 1606.50 target $ 1618 with a stop loss at $ 1595.00 - Stop Loss triggered.
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1600, $ 1584.86, $ 1580.39, $ 1522 (2012 low)

Silver Technical

Silver traders put up with another roller coaster day as prices fluctuate lower to retest support at $ 28.50 before turning higher. The overextended sell off create a strong tail which indicate another round of strong buying interest whenever the prices trade below $ 28.60. It has become a repetitive sequence but silver remains stuck and bears are still in full control. Despite that, it does put up a good volume of buying which may help support the current price. However, most silver traders are scarred and remain on the side-line because any rallies are subject to another bout of selling.

Unless silver can trade above $ 29.50, we will remain bearish and felt that there is too much volatility to take a position. We advise caution on any silver trade and will only get more bullish if $ 29.50 is given.

Long silver at $ 29.40 target $ 29.80 with a stop loss at $ 29.15
Short silver at $ 28.20 target $ 27.60 with a stop loss at $ 28.40
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.33, $ 27.93, $ 27.50

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.

26 Mar 2013 | Categories: Gold

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