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Gold & Silver; Quiet Trading Ahead...

Bullion Round Up

The financial crash of 2008 painted a sombre picture that the economy is broken by greed and high level of debts. Quotes from the late Richebacher stated that “a credit expansion in the USA is close to $ 10 trillion - in relation to nominal GDP growth of barely $ 2 trillion”. Market confidence was built with imaginary money and wealth illusion that gave many individuals an excuse to borrow over the limit. The banks were too happy to comply as they see only boom and no bust.

We are told that the current market situation is recovering. Solutions implemented are to print to infinity and promote low interest rate environment in order to build market confidence back and juiced the main institutions in order to prevent a “hard landing”. So are we back in this wealth illusion era? Is everything really going to be okay? Does the solution have an expiry date and what will happen after that? All the above questions raised, point to a great uncertainty in the future of our financial market. This uncertainty could just be the remaining catalysts that kept the gold rally alive.

Economic Round up

Asian market will be quiet as we enter holiday season to celebrate the Chinese Lunar New Year.

Last week, the Venezuelan government decided to devalue their currency against the dollar. Stock markets were generally bullish with the FTSE, Nasdaq posting positive gain and US S & P posting new high since 2007. In Brussels, EU leaders clashed with regards to cutting back on spending. Britain led the way with austerity plan while France and Italy argued for a budget driving jobs and growth. Eventually, they did come with an agreement with a deal that combines growth and consolidation.

Gold Technical

Short Term:
Gold is holding ground near to its support level of $ 1662 area and should that break lower, we will see a bearish convergence to retest support at $ 1653 and $ 1647. The stochastic has pointed lower and MACD has rolled to the negative zone which suggests more consolidation in the short term.

Medium Term:
The market remains lacklustre to test higher due to dollar strength. In addition, equities market are outperforming and marking new high which may suggest the decline of safe haven appeal. We have visited the 2 possible breakout scenarios on gold in the medium term. A break of support level could give way to retest January’s low of $ 1625 and possibly $ 1600. However, a break through its resistance levels could mean short covering that may well push gold back to $ 1700 and $ 1750 areas. The jury is still out.

Strong support lies at $ 1662 area and we will only be bearish if gold breaks below $ 1652. We are neutral on gold and think it lacks the catalysts to take out $ 1685 resistance. Look to buy on a potential upside breakout and target $ 1750. Resistance: $ 1674, $ 1686, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1663, $ 1653, $ 1647 (long term uptrend line), $ 1635, $ 1625

Silver Technical

Short Term:
The current situation indicate more consolidation to come as the MACD rolled negatively but may soon converging to cross higher. In addition, the stochastic is not showing any positive sign of crossing higher. We have also redrawn the uptrend line to show the symmetrical triangle pattern that exists on the 4 hourly charts. A break below the uptrend line bode bearish momentum and we look to short the market on that signal.

Medium Term:
The stochastic on the daily chart shows selling pressure is slowly eroding the support level at $ 31.23 level. Time and time again dip buyers exist on that area. Despite that, the signal outlook does not bode too bullish as MACD is rolling flat. We are back to our neutral bearish stance on silver and will get more bullish if we can take out $ 31.70.

A break of $ 31.23 will not bode well for silver. Look to go long at $ 32.05 and target $ 32.40.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 31.23 (38.2%), $ 30.60 (200 DMA), $ 29.25 (January low)


Currencies Value Change comment
Euro 1.3372 Euro suffered a deep correction as politicians voiced their worry of the strong currencies that may affect their economy recovery.
AUD 1.0285 AUD found support after the sell off to mid-1.0250.
JPY 92.95 Dollar strength sapped the momentum away. General profit taking ahead of the long weekend in Japan.
US Index 80.27 US dollar index is the benefactor of the falling Euro and equities sell off.

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate.

11 Feb 2013 | Categories: Gold

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