Gold & Silver; Peace and Dove
A surprise move by Larry Summers to pull out of the Federal Reserve chairman race gave the equity market huge boost. Despite rumours that he is the likely candidate to win the chairman position, the sudden pull out made it all the more compelling. Market jumped higher after they perceived that Miss Yellen is the favourite now and she is well known to be a dove. Precious metal initially rose in the early trading hours to $ 1335 area (a return move to the trend line) but then failed to hold on to gains. As of the time of writing, short the rallies seem to dominate the current market sentiment. Our weekly analysis also points to weaker number as we see both metals face negative technical outlook. Physical demand from Asia has not taken full advantage of the recent price drop as investors choose to wait and see. ETFs demand has not picked up either with further decline on SPDR gold trust by 0.66 % (Reuters). Chairman Bernanke will speak this Wednesday, outlining FOMC plan and the amount to taper. Expect a volatile trading session ahead of this event and be prepared to be surprise.
We have the German election on Sunday 22nd September, with Miss Merkel leading ahead to win another round. This should give further stability in the Eurozone area as the economic policy will remain largely unchanged.
Gold Technical Outlook
Technically, the downtrend look set to continue despite finding support at $ 1305 area. The psychological barrier at $ 1300 will provide some solid support but should that break, the price is most likely to retest previous support at $ 1275 area. Meanwhile, the weekly chart also supports the scenario for lower price after the end of the corrective rally. Resistance now stands at $ 1355 area but we expect range trading for now before the FOMC.
|Resistance: $ 1434, $ 1455, $ 1525 Support: $ 1275, $ 1210, $ 1180|
Traders Notes: Short at $ 1345 stop $ 1353 target $ 1300. Stop loss moved lower to $ 1338 in order to secure some profit on the initial short. Looking to add on short should we break below the $ 1270 area.
|Short Term (1 - 3 weeks)||Medium Term (1 - 3 months)||Long Term (6- 12 months)|
|Bearish - $ 1280||Bearish - $ 1215||Target $ 1500 / $ 1600|
Silver Technical Outlook
Despite dollar weakness, silver failed to rise any higher given that gold failed to shine as well. Daily chart shows that the downside resumption sets to continue and silver found some support at $ 21.80 area. Should the price break below $ 21.50, it will trade in previous uptrend channel line with the next support at $ 20.15 area. Technically, more pullback is expected with the MACD heading lower and RSI indicate that there is more room for this pullback.
|Resistance: $ 22.45, $ 23.90, $ 24.53 Support: $ 21.40, $20.80, $ 19.50|
Traders Notes: We closed our short position after hitting the stop loss at $ 22.00. Looking to add short cautiously should the opportunity arise. Otherwise, remain flat ahead of the FOMC meeting given how volatile silver can be. Short at $ 21.35 target remains open.
|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?|
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17 Sep 2013