Gold & Silver; Post SNB-Tsunami
Revisiting the previous weekly analysis “Gold 2015 Kick Off” has certainly covered many aspects of what we thought may happened. One thing for sure is that we did not anticipate such a swift changes to happen as early as January 2015. The kick-off has certainly made many despair (some very wealthy) but for sure it has not been a good start. Overall stance and views from Central banks are either cautious or rather bleak with many worried about how they can continue to provide growth in the current economy. 2014 has promised the world with better changes and much more positive news to come in 2015 but it seems to have taken a turn.
Investors may need to revise their overall outlook but the ultimate safety in physical bullion will only grow stronger from here on. The parade continues among established analyst that see bullion prices remain pressured but recent events could unravel such debacle. Contrarian traders will playback “I told you so” or “sell the rumour, buy the fact” scenario but who is to say that one would anticipate the bombshell from Swiss National Bank (SNB).
Our previous commentary touched upon the below line and we just want to refocus again:
“Here comes the unknown and what many would assume as black swan events. Let us assume Greece exit and how does the other EU members contain such contagion? The Eurozone bloc is prone to slow changes and has often failed to stick with or make hard-core policy changes. Many would wonder with additional equity in the market, what are the side effect will it bring? The stand-off between Russia and Ukraine set to continue but should that end in a peaceful agreement, the rouble look to stabilise but the long term damage with oil prices have been done unless we see a cut in production. Developing economies may not fare any better as well – but continue to offer a substantial opportunity should investors look to diversify.”
Traditional investors will have to take one hard look at their portfolio again. Current bullion prices remain at discounted level and any lower would give the opportunity to add more physical bullion as a source of diversifying their overall investment. There is no one safe source of investment in this world but physical bullion will remain as the core fundamental protection to any individual’s wealth.
Gold Technical Outlook
Last week we went with a slightly neutral recommendation but did forewarn that a break higher from the downtrend line will give the bulls the initiative to test higher and it did with such rage. Short covering as well as safe haven buying is strong evident as investors look to diversify their portfolio. The yellow metal may have break higher but we see strong resistance remains at psychological level of $ 1300 and $ 1320 area. Pullback is to be expected and only further buying could fuel a higher gold price.
Previous commentary “Prices remain congested on the downtrend channel line and only a break above $ 1209 will allow the next upside to target anything near the region of $ 1239 and $ 1250 area. Our view remains bearish as gold trade within a descending triangle pattern and any breakout could see another leg lower with a potential target of $ 1030 and even $ 900 region.”
Trade: Buy on the break of $ 1209 with a stop loss at $ 1199 to target $ 1218 and then $ 1239 area (valid only for this week). The trade recommendation stayed valid and as we all know it, gold hit through all resistance and the buy kick us off in a profitable 2015. With psychological resistance at $ 1300 and then $ 1320 area (downtrend line) we would favour shorting the yellow metal as it will look to pullback to retest previous resistance now support. Short the yellow metal between $ 1282 – $ 1298 area to target $ 1266, $ 1255 and $ 1245.
20 WMA = 1211 (+2)
50 WMA = 1267 (+2)
100 WMA = 1309(-6)
Silver Technical Outlook
Silver prices have made a significant move out of the large long term downtrend line and this is a call to be cautiously optimistic. The bear rout could be at the end of its tale and a period of further consolidation with solid building of a base is the picture that we painted for the next few weeks to months. The white metal could retrace back to test the previous resistance line – which is now support at $ 16.48 area and further upside can only be seen once the short term MA cross above the 200 DMA (golden cross scenario).
Trade: Silver continue to remain as a hard commodity to trade but the outbreak above the long term down trend line has certainly changed the overall landscape. Silver could surprise us more and any reversals remain in doubt given its volatile nature.
20 WMA = 16.61
50 WMA = 17.93
100 WMA = 19.16
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19 Jan 2015