Gold & Silver; Propelled Higher
Bullion Round Up
Is it too early to tell that there is a scant change in sentiment about the direction of gold and silver prices in the coming weeks? Last week price action seems to indicate that a bottom is already in place given that despite a good economic data, continuous outflow in ETFs as well as a lack of physical demand - prices are rising and holding on support above the 50% retracement from previous low of $ 1180. In addition, we cannot discount the fact that short sellers are doing rounds of short covering in the thin and volatile market. Perhaps, the recent price action may have given many short sellers an early warning of a possible rise in gold prices. Several bullish factors are the negative GoFo rate published by the LBMA, concern about the low gold inventories held by COMEX, strong physical demand keeping prices supported as well as the uncertainty to taper in September.
Meanwhile, bullion prices are well supported from the weak dollar trade. Technical indicators are also posting up some bullish candlesticks (last Thursday a Morning Star - a typical reversal pattern) that could lead to higher price in gold. On top of that, Silver managed to trade above $ 20.00 and holding on its gain. We have covered the silver market closely despite staying on the side-line most of the time but we did stress that it needs to break out of its downtrend channel. A follow up buying will give the short sellers food for thoughts - potentially a corrective rebound higher could be in place. Industrial metals such as platinum and palladium also benefited from good economic data out from China - Copper charging higher. It seems that it is not that bad at all despite talks of China slowing growth but is this sustainable in the long run? Will the dollar find a bottom and eke out a rebound higher; catching all those who thought the reversal will stay? Tune in and find out as this week price development will give us more clues.
Be very cautious and best not to jump into any trade until we see a clear breakout.
Gold Technical Outlook
With the price of gold rising back above $ 1300.00, the gold bulls are relieved and see this as an opportunity to push higher. The recent price action could well indicate that short sellers are busy unwinding their position as they see the lack of follow through selling. The market is thin and the big boys are away on holiday so trading direction could remain mix for some time. Taking a position in the range of 1290 to 1320 remains risky and most traders are waiting for a breakout so as to provide a direction to trade in. However, the short term remains biased to the downside for now.
Only if it breaks below 1273, then it will trigger more stop loss and could easily take gold to retest support at $ 1265 area and only a break below $ 1240 will warrant a revisit of $ 1210 area. On the other hand, if it can break above $ 1350 convincingly - we would not be surprise to see higher gold prices due to more short covering.
|Resistance: $ 1308, $ 1318, $ 1347 Support: $ 1273, $ 1264, $ 1244|
Traders Notes: Buy the breakout at $ 1353 to target $ 1375 area or higher. Only short gold if it breaks below $ 1240 as downward resumption can continue to target $ 1210 and $ 1180 area again.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bullish - target 1355 / 1371||Bearish - target 1210||A rebound rally?|
Silver Technical Outlook
The weak US dollar index and previous retest of low at $ 19.20 (now become support) has given silver enough bullish momentum to trade higher. It has broken out of the downtrend channel line but still within a tight Bollinger band. A bullish breakout and follow through buying is needed so as to propel silver prices higher. Investors could pile more on silver on the back of a possible recovery and better than expected Chinese economic data (assuming that the data remain positive). Expect a retest of $ 20.60 and possibly as high as $ 21.05 before a period of consolidation. Silver could embark on a mini uptrend line and the RSI seems to support the higher prices. The stochastic fast line has also risen higher while the slow line has got more rooms to the upside.
|Resistance: $ 20.60, $ 21.00, $ 21.59 Support: $ 19.80, $19.20, $ 19.00|
Traders Notes: Buy on the breakout of $ 20.60 but with a stop loss at $ 20.10 target $ 21.05 and $ 22.00 area. A higher high is needed now after it made a higher low.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bullish if can break pass $ 20.55 area||Bearish - target outlandish at $ 17.00||Bullish - a potential bull run?|
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