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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.

Economic 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
Both metal faced further pullback and previous low looks to be a viable target. Expect more range trading between $ 1310 to $ 1336 area and we are not expecting any major move until certain support or resistance give way.

Gold Technical Outlook

Daily Chart
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

Daily Chart
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?

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. 

26 Sep 2013

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