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Gold & Silver; Perception!

Bullion Round Up

After taking out the resistance at $ 1587, gold settled with a close above the 20 DMA ($ 1592). The current development suggests that gold has kicked its old habit of range trading between $ 1560 to $ 1586 areas. Gold need buying momentum and positive catalyst such as the comments by ECB council member and head of Germany’s Bundesbank Jens Weidmann that suggest the ECB will maintain its continuous accommodative monetary policy “for as long as necessary”. The script is similar to the remarks made by Fed chairman Mr Bernanke when he launched QE infinity and the only difference is that the ECB did not set any unemployment or inflation target.

Dovish remark such as this is taken well by the gold community. At the moment, several major central banks are continuously embarking on quantitative easing as well as promoting ultra-low interest rate environment. Japan needs such programme in order to reach their 2% inflation target and vouch to end deflation. South Korea is mulling over plans to ease and potentially weaken their currency as they are export dependant.
Meanwhile, Chinese investors are concern that its central bank may tighten the loose monetary policy in order to curb the rising property prices. We felt Chinese officials may focus to curb the rise in property prices with other methods (possibly emulate the strategies used by Singapore government) and maintain the loose monetary policy.

On the positive note, the outflow from gold backed SPDR has slowed down. There are some light covering by the bears and bargain hunters are back to re-enter the market. Over the last few weeks, we have witnessed a large outflow of gold ETFs but support came in the form of strong physical demand out in Asia. The other support also comes from Central banks buying the yellow metal. During the downturn, gold may have flush out all the weak hands and the current perception seems to suggest that it may be time to re-enter.

Gold Technical

Gold propelled higher on the back of technical buying as well as economic worried in the Euro area. However, it is unable to break the psychological level at $ 1600.00. Yesterday high came in at $ 1599.35 before being turned back to retest support.
Fibonacci retracement from the low to the high of this month shows support levels at $ 1584.86 (38.2), $ 1580.39 (50%) and $ 1575.91 (61.8). Trading volume is surprisingly low and gold headed lower on the back of a positive US economic data. Today, we anticipate another bout of US data: Initial Jobless Claims and continuing jobless claims that may paint a clear picture if the economy is really gaining traction.

The pullback is seen as further consolidation in the next few trading days as the yellow metal waits for more economic data. General sentiments remain weak as negative perception still prevails. Gold bears will try to stop gold advancing above $ 1600.00 in the short term but should $ 1620.00 given; we could see a wave of short covering. In the meantime, prices need to hold on key supports in order for it to attempt another rally to take out $ 1600.00

Buy gold at $ 1592 and target $ 1605 with a stop loss at $ 1588.50 - we decided to close this trade at $ 1596.50.
Long gold at $ 1580 if given and target $ 1595 with a stop loss at $ 1577.50.
Resistance: $ 1604, $ 1625 (50%), $ 1639 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1584.86, $ 1580.39, $ 1561.4, $1555, $ 1545, $ 1525, $ 1522 (2012 low)

Silver Technical

Silver consolidate its previous gain and retest lower. In addition, the US dollar index weight on silver prices to advance further. As of the time of writing, silver traded just above the 50% Fibonacci retracement line ($ 28.84) and below the 20 DMA. Low volume and better US economic data added selling pressure as investors look to cash in on their positions.

We are neutral bearish as prices once again traded below the psychological level of $ 29.00. The 4 hourly charts also show that the stochastic has crossed lower which signal further consolidation ahead.

We advise caution on this silver trade and will only get more bullish if $ 29.50 is given.

Long silver $ 29.15 to target $ 29.50 - stop loss added at $ 28.85.
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.

14 Mar 2013 | Categories: Gold

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