Gold & Silver; Range-Bound
Demand from central banks continues to provide core support for the current gold price. Physical demand from Asia has gone soft but jewellers expect more buying in India. In the meantime, holiday in China will dampen physical support throughout next week. We expect prices to break below $ 1300 on the continued bearish sentiment towards the yellow metal. However, expect increase volatility as the market brace for the result on US debt ceiling that could throw out a few surprises. Meanwhile, Angela Merkel continues to strive for a grand coalition and maintain a hard line approach on austerity policies. A weaker currency is what most central banks are striving for given the lack of inflationary pressure. High unemployment figure remains to be a social and political problem. Spare capacity in the economy will continue to drive down wages which could affect overall demand. The current policies seem to suggest that central banks prefer to use a trickle-down effect to boost the overall GDP output. Only time will tell if such policies is going to work.
data that we are anticipating to move the market for today are:
UK GDP numbers
- US Initial Jobless Claims
- US GDP numbers
- US Pending Home sales
Gold Technical Outlook
It is becoming rare to say that the bulls won the day after hitting a low of $ 1305 and then short covering pulled the metal higher to retest $ 1329 level. The current price action has unwound previous kneejerk reaction post FOMC statement and back to square one. Prospect of tapering has capped the upside and gold faced strong resistances. Technically, a bearish head and shoulder formation could form with a neckline at $ 1278 area. Should gold break below $ 1275, previous low at $ 1180 seems highly probable. At the moment, patience while trading in the trendless market is the best advice.
|Resistance: $ 1434, $ 1455, $ 1525 Support: $ 1278, $ 1210, $ 1180|
Traders Notes: Short only if it break $ 1290 level. Going long on a break above $ 1380 - the target will be previous high.
|Short Term (1 - 3 weeks)||Medium Term (1 - 3 months)||Long Term (6- 12 months)|
|Bearish target $ 1210||Bearish - $ 1180||Bearish|
Silver Technical Outlook
Silver price action trade below the various moving averages which encourage the bears to keep a tight control on any upside. Daily chart shows that support at $ 21.20 is holding the metal for now while the MACD line trying to cross higher. The daily RSI is below 50 but has not reached the oversold territory. Daily candlestick also shows an evening star formation which suggests a bearish reversal pattern. Therefore, we envisage further selling and a possible test of $ 20.25 area.
|Resistance: $ 23.45, $ 23.90, $ 24.53 Support: $ 21.40, $20.80, $ 19.50|
Traders Notes: Looking to short if it break and close below $ 21.30.
|Short Term (1 - 3 weeks)||Medium Term (1 - 3 months)||Long Term (6 - 12 months)|
|Possible retest of $ 20.60 area||Bearish $ 20.00 area||Bullish - a potential bull run?|
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26 Sep 2013