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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

4 hour Chart
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

Daily Chart
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?

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. 

17 Sep 2013

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