Gold & Silver; Potential Gold Price Breakout (Up or Down?)
Bullion Round Up
Another uninspiring start to the week as gold prices remains subdued below the psychological level of $ 1400.00. During the early Asian trading zone, prices remain strong at $ 1390.00 before giving back some grounds to trade below $ 1387 in the early European trading hours. Gold has been range trading after printing a low at $ 1365 but found higher lower over the course of last week at $ 1373 and $ 1378. Despite a positive environment of lower US dollar index and a minor sell off in global equities, gold were not able to capitalize and make a higher high. Investors are shunning away from the safe haven asset as ETFs outflow continue although the heavy selling days are over. The lack of physical demand out of Asia could only support prices but unable to take it higher. There were clear interests among the short sellers that gold below $ 1400.00 is the way forward - thus keeping the bear market well alive.
This week, we are watching closely the US economic data as well as FOMC statement whereby Chairman Bernanke will speak to send a clear message to the market about Fed decision on tapering. Continues talk on reducing the current asset purchase programme from $ 85 billion dollars every month have reached a certain level. Analysts are arguing that the Fed is creating asset bubbles in the US equity market as well as a new housing bubble. However, the Fed felt that the economy is recovering well and underway but there are clear signs of divisive Fed officials as pressure mounts to curb the current QE programme. We shall learn more about their decision tomorrow. Meanwhile, volatility in the market is expected to ratchet higher as we draw closer to the FOMC statement. Our advice is to have helmets on and trade lightly with a tight stop loss - otherwise stay on the side line.
The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.
After a close at $ 1390.00 area, gold started well in early Asian trading hours holding the same area but the lack of demand to push prices higher was a disappointment. This indicates that the market is not ready to break above previous resistance at $ 1394.50. As per our last commentary, short sellers have strong interest to keep prices below the psychological level of $ 1400.00 and they have successfully done that. The bears remain in control and gold continue to range trade aimlessly before the release of the FOMC statement. Many traders are either on the side line or staying nimble. A break pass $ 1373 will trigger lower prices around $ 1355 to $ 1345 area. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower.
|Resistance: $ 1395, $1400, $ 1423 Support: $ 1373, $ 1365, $ 1355|
Traders Notes: Short gold as it breaks trend line at $ 1390 / $ 1395 with an open target - stop loss stands at $ 1403 / $ 1425
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bearish - target $1361||Bearish - target $ 1340||Bearish - target $ 1280|
Silver has continued to trade a lower higher and lower low if we used previous high after the major sell off. Previous high of $ 24.71 was the peak and we draw a straight downtrend line which continues to play as a strong resistance line (see chart below). Technically, the oscillators suggest that the market is at an oversold territory but the lack of demand hampers any rally. There were no strong buyers at this price level, instead most are short term speculators dip buying on the market and sell when it spiked higher. Investors favour a lower silver prices and we may continue to see it weaken before any rebound rally.
|Resistance: $ 22.51, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00|
Traders Notes: Stay on the side line.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bearish momentum||Bearish||Bullish - a potential bull run?|
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18 Jun 2013 | Categories: Gold