Gold & Silver; Pivotal Period!

Bullion Round Up

Gold held its ground above $ 1600 after the Fed statement but there was no loud celebration or cheer from the bull camp. It was rather muted despite the dovish remark from Mr Bernanke. We are slightly worried with the muted effect and can only think of a few reasons. First, a higher gold price remains at the mercy of the continuous Cyprus negotiations. Second, investors are still mulling over the recent Fed statement and unable to decide how to trade it. Third, lack of interest from investors as the Fed stays on course so no additional catalysts other than the stock market. Fourth, stronger US dollar is hampering the yellow metal to go higher. Last but not least, the revised lower unemployment numbers do raise some concern that the Fed may soon consider cutting back on QE.

It needs to break the next resistance level of $ 1620 by early next week. If not, we fear the on-going negative sentiment will drag prices lower to retest support. Recent positive data suggest that buying interest picked up in gold back ETF products and data from CME group show open COMEX future position has fallen. There is some light short covering but not enough to generate a stronger momentum to break the next key resistance.

As of the time of writing, we received further confirmation that the Eurozone economy continue to slump. Eurozone manufacturing PMI continue on its downward trend and contraction. Germany manufacturing PMI and services PMI is no exception as it came out lower than expectation. Once again, Mr Market seems to ignore the negativity and seem immune to the negative news. Meanwhile, our friend in Commerzbank seems to share our views that a higher gold price is achievable as investors look to buy it as inflation hedge. We have witnessed 26% inflation rate in Argentina, China is worried about its inflation target, UK raised the same concern but will be more flexible, India continued and still working to lower the 11% inflation rate. Meanwhile, the US is still enjoying low inflation rate for a little while.

Gold Technical

Gold continue its upbeat momentum after the US jobless claim data and existing home sales. Any advancement to retake the pivotal resistance line of $ 1620 remains a challenge. The strong US dollar act as a barrier and selling pressure to protect that line of resistance is fairly strong. We have covered in our previous commentary that if $ 1620 is given, a short covering rally may offset a higher gold prices. The bears have a strong interest to keep any advancement at bay.

The technical development on the hourly and 4 hourly chart looks bullish but we are concern with the lack of volume. Prices hit a high of $ 1616.85 before retracing lower. Both short term charts have shown that the MACD has crossed to positive territory and the stochastic fast line is still indicating buying momentum. Fibonacci retracement line from March low to high show supports at $ 1595, $ 1589 and $ 1582.

Should we break $ 1620, we could see a quick rally to test $ 1650 and $ 1700.00.

Silver Technical
Be careful what you wish for! Yesterday, we witnessed a heavy volume day on silver as it broke higher after the US jobless claim data. In our last few commentaries, we have been nagging at the lack of momentum as well volume that could determine where the silver market may go. The latest move on silver seems to suggest that there may be some upside traction soon but we remain cautious. We would like to see silver taking out $ 29.50 so that it can target the following resistance at $ 29.66, $ 30.20 and $ 30.73.
We advise caution on any silver trade and will only get more bullish if $ 29.50 is given.

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22 Mar 2013 | Categories: Gold

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