Gold & Silver; Pre FOMC minutes
Bullion Round Up
The quiet market with lack of interest and light movement is rather understandable given the high rate of anticipation of the FOMC meeting minutes. Traders who had long gold on technical breakout and corrective rally were reducing their exposure after gold managed to hit a high of $ 1385. Silver also found support at $ 22.29 level after a good run up to the high at $ 23.40 area. David Govett of Marex Spectron added that “all four metals are slightly lower but had a very healthy move over the last couple of weeks and a breather is no bad thing”. Trimming down on their positions is a cautious way to play the current market and allow their profit to run higher should the FOMC meeting minute’s remains dovish. Should the meeting minute lack any real direction on Septapering, we can only assume that prices will rally further to take out previous resistance level.
Emerging markets such as India and Indonesia continue to see outflow of easy money from their equity markets and their currencies continue to weaken. We felt that with the summer doldrums coming to an end, most traders will return and a sense of direction will soon prevail on the US dollar index. Should the economic data continue to sideways, tapering could still take place but possibly at a smaller amount then what most expected. The real surprise is if there is a delay in tapering.
Going forward, prices may consolidate its current gain before resuming higher. Traders and investors could also lock up their profit ahead of the FOMC meeting minutes and Jackson Hole event. The US dollar index continues to weaken and a break below the technical level of 80.95 could further weaken it. Therefore, the upcoming events could provide a base for the dollar index to regain some strength. Otherwise, we expect more weakness going into Septapering period.
Gold Technical Outlook
A corrective move higher is currently in play to target $ 1365, $ 1376 and $ 1415 area. Our only worry is that the larger trend remains down and this bout of short covering rally could soon be over.
We cannot rule out that after this short covering rally we will see a pullback to retest the breakout range around the $ 1310 area. Only a break below $ 1270 will give the bears the catalysts to retest previous low. On the other hand, the weekly chart suggests that the current rally could end at $ 1415.00 resistance area (38.2% retracement from the high at $ 1800 to the low at $ 1180).
|Resistance: $ 1385, $ 1395, $ 1414 Support: $ 1348, $ 1318, $ 1273|
Traders Notes: Flat for now. Possible breakout at $ 1385 eyes for a potential run up to $ 1404 area but traders are also looking to short metals with stops at $ 1425.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bullish - target 1385 / 1414||Bearish - target 1310||A rebound rally?|
Silver Technical Outlook
Silver is trying higher to break resistance from previous downtrend line (see daily chart below). Should it pullback from here, the market will remain healthy and allow more rooms for bargain hunters to re-enter and add on their long positions. That is based on the assumptions that gold prices could head higher which could then support the white metals. Given the increase interest in bullion again, silver may well have more rooms to the upside before the pullback.
|Resistance: $ 23.35, $ 24.00, $ 25.60 Support: $ 22.65, $22.35, $ 21.65|
Traders Notes: Flat for now after stops at $ 22.65 hit from a long position $ 20.60. Looking to re enter long or possibly short at higher prices.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bullish target 24.55||Expect consolidation to retest support at $ 21.70||Bullish - a potential bull run?|
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21 Aug 2013 | Categories: Gold