Gold & Silver; Physically Dependant!

Bullion Round Up

The physical demand from China alone seems to support the current gold price. We have seen that dip buyers were around to bid gold higher at $ 1350s area - indicating a strong support level in the short term. Break below $ 1350 and gold could potentially retest previous low at $ 1337 and $ 1321. Commerzbank weekly bullion report added that a retest of $ 1321 is a matter of when and not if. They are also projecting gold to take out $ 1321 and potentially test $ 1308 level. Should gold break below the psychological level of $ 1300, it will open up further rooms to test $ 1280 level. However, there are other scenarios that could see gold moving in the opposite direction.

A clear break above $ 1400 and closing above that level will give the bull an edge. CFTC report showed that Hedge Funds are holding large short positions and should gold prices moved higher; the pressure to short covering will be immense. Despite that, gold continue to face strong resistance and selling pressure. It needs to take out $ 1404 followed by $ 1417 and a close above $ 1440 will be a game changer. Upside potentials are there but we advise caution as gold is trading in a bear market. Another failure to break $ 1487 will confirm that a retest to lower prices is in the cards. Getting above $ 1440 and $ 1450 level is considered neutral ground if one look at the weekly chart. In order for the bull to regain confidence, we need to see prices trading above $ 1525 level again. At the moment, it seems a lot harder to reach that scenario unless we see a pick-up in sentiment.

All is not well as the global economy and central bankers continue to ease their way out. Recent report from the OECD claims that the ECB will need to rescue the Eurozone again. The current market sentiment may ignore their fair warning as the risk of default in the Eurozone countries have subsided - claimed by the pro-Eurozone group (Draghi et al). Greece has been able to draw investment from international investors and its bond yield is falling. Meanwhile, Spain and Portugal continue to enjoy more lax deficit reduction as austerity is scaled back. However, we continue to see that politicians and the ECB continue to kick the can down the road and it is a slow progress. We cannot ignore that the problem in the Eurozone could resurface once again.

Gold Technical

Gold continue to consolidate in an ascending triangle with higher lows while upside remains capped at $ 1400 level. Several attempts to overcome $ 1400.00 have only spark more selling. We also noticed that gold have not been able to act positively despite supporting evidence in the weakness in US dollar index as well as the minor correction in equities. Only a break and a close above $ 1420 will give us the confidence to consider taking a buy position but the current range trading means that we cannot ignore the potential of a retest to $ 1354 level.

Are we near a market bottom and at what price will a major short covering happen?

Resistance: $ 1414, $1417, $ 1438 Support: $ 1354, $ 1337, $ 1325


Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bearish - target $ 1354 at least Bearish - target $ 1321 Bullish - target $ 1440



Silver Technical

The white industrial metal continues to consolidate between $ 22.80 and $ 22.20 level. Prices dipped lower in the early Asian trading sessions but recovered shortly on the back of a weaker US dollar index. Sell off in equities are also helping to support higher prices but we are disappointed at the rebound rate despite all of the positive catalysts. This indicate that bearish sentiment dominates and the lack of follow through buying could spell more trouble for Silver prices in the coming weeks. Meanwhile, a break above $ 23.23 will give the bulls more ammo to retest $ 26.00 area.

Resistance: $ 23.19, $ 23.65, $ 25.59 Support: $ 22.05, $ 19.66, $ 19.00


Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bearish - Break $ 22.00 and it is a free fall to $ 19.00 Bearish - break below $ 23.15 could see a retest of $ 22.00 Bullish - a potential bull run?



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30 May 2013

About the author

Robert Jillies

Robert is the youngster in the team and comes with a technology background. He is currently adding journalism and fundamental market research to his repertoire.

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