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Gold & Silver; One-Way Traffic

Bullion Round Up

Gold failed to stay above the support at January low of $ 1625 and plunged further to reach a low of $ 1598 during US trading hours. In the last couple of weeks, any positive signs or catalyst on gold remains muted. On the other hand, negative news tends to dominate and exert more downward pressure on the yellow metal. It does seem that no news or signs are good enough to support gold. Does that mean the yellow metal has lost its allure as an inflation hedge tool?

Economic Round up

The G20 meeting lasted for 2 days but financial media played down any currency war discussion. The economists covered the benefits of a currency war at length and complimented Japan for taking the right step In addition; they encourage others to look at the benefits that could be garnered if done correctly. Meanwhile, the other side of the camp reiterate that currency war is just another cheap tool for a trade war. Devaluing the currency will help that particular country to boost its export as well as its own coffers.

This week, we have the FOMC meeting minutes followed by US existing home sales data as well as Germany GDP numbers. Today is a US holiday and we expect a quiet market session.

Gold Technical

Short Term:
Gold took out its last support at $ 1625 which was January’s low. As per our last commentary, should the yellow metal fail to hold on to $ 1625 then we could revisit $ 1600 and it did. After the selling climaxes, prices managed to recover to $ 1610 but the real test will happen this week as the Chinese are back from their week long lunar break. The metal remains weak for the next few days but bargain hunters are on the prowl. We expect choppy consolidation phase.

Medium Term:
The daily chart paints a consolidation phase that is setting in after the selling climaxes. The MACD albeit is still in the negative zone, it looks oversold at the moment. Meanwhile, the stochastic has crossed higher suggesting some buying interest at the current prices. Prices retraced back to last August low of $ 1590 area and may continue to do so until a strong support can be found. Choppy trade ahead but expect that these prices will generate strong buying interest.

Our new short at $ 1625 worked out well and we profited at $ 1615.00 given the technical weakness on gold. We expect renewed buying interest from savvy investors but will not discount the fact that prices may further consolidate. Resistance: $ 1630, $ 1640 (50% retracement), $ 1650, $ 1674 (50 DMA), $ 1686, $ 1697 (previous high) Support: $ 1600 (psychological level), $ 1596, $ 1590

Silver Technical

Short Term:
Prices broke lower last week and take out the psychological level at $ 30.00. We did warn that any rallies are to be sold. At the moment, silver look heavily oversold but the selling pressure remains and look well place to retest January low at $ 29.25. There is support at $ 29.63 but once that is given away then we will revisit $ 29.25.

Medium Term:
The daily chart looks broken and remains weak. Prices retraced back and the next support at $ 29.25 could be pivotal. Last year August, silver prices broke higher after many runs close to the bottom end of the Bollinger band. It spiked to $ 35.00 level and has ever since retraced back. The MACD rolled to the negative zone and the stochastic has not cross higher. We remain bearish on silver for now.

We remain bearish and may look to short the market again on any bounce.
Resistance: $ 31.23, $ 31.60, $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 29.63, $ 29.25 (January low)


Currencies Value Change comment
Euro 1.3341 Euro remains stable after the G20 meeting.
AUD 1.0293 AUD is much firmer at higher prices.
JPY 94.07 Looks like the weaker JPY is set to stay for a while.
US Index 80.68 US dollar index performed strongly again but will this last?

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.

18 Feb 2013 | Categories: Gold

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