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Gold & Silver; On Demand!

Bullion Round Up

There are several reasons why precious metals - especially gold, is back on demand! In our previous commentary, we have covered the economic issues such as Argentina hyperinflation, political issues on Italian election, fragility of the Eurozone stability as well as our concern on continuous money printing programmes by several countries at once.

Excess liquidity is needed to help build confidence in the banking industry after the worse financial crisis. Central banks print new money simply because prior to the 2008 financial crisis, the public were borrowing over the limit and the banks are only too happy to lend. The prosperity that many thought they had - was in fact built on the back of future debts (assuming that their house prices and the boom in the economy continue to infinity). Obviously, now we have learnt that the boom years do not last forever and it does give way to bust.

On-going uncertainty regarding Cyprus bailout will continue to support gold above $ 1600 level. We cannot help but advise caution as gold remain vulnerable if a solution to fix Cyprus is reach. The financial community very much prefer the stock market and jump en masse to the safety of the US dollar which dampened the mood of holding the yellow metal. Latest report of a small inflow into gold backed ETF shows a possible change of heart from investors. However, it remains too early to say that the tide has change at all. To say the very least, gold has held its ground but a positive buying momentum is still lacking. The media and investment banks have all but bombard negative sentiments on gold as an investment that does not give yield. It will take time for gold to reclaim and establish stronger confidence as an inflation hedge in the very near future.

Gold Technical

Pre Fed statement, gold prices hovered between $ 1607 and $ 1611. US dollar index has been weak throughout the trading day and that lend some support. Fed policy will continue with its bond buying of $ 85bln and no mention of slowing down the easing. Initial market reaction was a sell off as gold tumbled to a low of $ 1599.57 with a significant large volume of contract exchanging hands. Prices eventually recovered to trade above $ 1600 as the market digest Fed policy as well as Ben Bernanke Q & A.

We are cautiously bullish as gold managed to hold on to support at $ 1600 for the second time. Drawing from last week’s low of $ 1577 to this week high of $ 1616, we have several retracement lines acting as initial short term support. Prices retested the 38.2% retracement and other supports are at $ 1596 and $ 1591.

Should we break $ 1620, we could see a quick rally to test $ 1650 and $ 1700.00.

Long gold at $ 1620.00 target $ 1630 with a stop loss at $ 1611.50.
Long gold at $ 1601 target $ 1615 with a stop loss at $ 1591.00
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1603, $ 1600, $ 1584.86, $ 1580.39, $ 1522 (2012 low)

Silver Technical

As per our last commentary, silver has yet to define its direction and prices remain capped in a tight range. Range traders will play their trades between $ 29.00 and $ 28.75 but at a substantial risk.

We maintain our view that silver prices are still vulnerable to downside risk in the short term but stick to our long term view that it will benefit with higher prices. Silver will be a good bet in the long run as the Daily chart paints a rather bullish picture. There has been several positive hammer tails which suggest buying interest exist at $ 28.50 and a bottom is already in place. It needs more buying momentum to push for higher prices and one concern we have is the lack of volume.

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
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.60, $ 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.

21 Mar 2013 | Categories: Gold

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