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Gold & Silver; Rebound!

Bullion Round Up

Continued central bank buying of gold reported by the IMF has not really help the overall situation in the current market price. Gold price have continued to face headwind as it tried to tackle the previous high of $ 1620. The initial momentum was started by the on-going Cyprus bailout saga which then fizzled out. Other safe havens such as the US dollar and German Bunds came as a better choice than gold. In addition, the stock market proved a better ground where one can put their money to work rather than on the yellow metal. Physical buying in Asia remains scarce as investors wait for lower entry point and the biggest bullion buyer - India is reducing the demand for gold as they undergo the end of their fiscal year.

However, all is not lost as gold will continue to attract long term investors given the state of the global money printing programme. We have repeatedly argued that the global economic recovery is on borrowed time as government officials kick the can further down the road by printing. The possibility of higher inflation rises over time with any future economic growth. Financial markets are hooked with easy money and if the Fed tapers the programme, it will greatly affect market confidence and affect the proclaimed recovery. Therefore, money printing will sooner or later lead to inflation - it is just a matter of when.

Cyprus bailout programme left a bitter aftertaste and it seems to linger, affecting the European stock market as well as the Euro. EU officials have repeatedly called for calm and certainty but the recent ups and downs showed how sensitive the market is. Public confidence about the bailout programme is at all-time low and the tough stance on Cyprus bailout programme will only inflict more pain to the Eurozone. The current Eurozone situation could in fact lift some negative sentiment off gold.

Gold Technical

Gold found strong support after a retest at the 20 DMA for the second time this week. The first test took the metal down to $ 1589 before retracing higher. We witnessed a copy and paste scenario yesterday which may suggest that short sellers are short covering their positions as we approach the end of the Q1 and ahead of the long weekend in Europe. It also indicates that short sellers are under pressure to offload their positions for a good profit. The recent trade of blows between bulls and bears may soon come to a conclusion that prices could head higher.

Technically, gold managed to stay above the 20 DMA at $ 1592.22 and reversed higher. Moving forward, it will need more buying momentum to sustain well above $ 1600.00 before tackling the pivotal resistance level of $ 1620.00. Gold will be very sensitive to the next economic data from the US and this data could prove to either stop the good rebound it has put in or potentially act as a catalyst for gold to push higher before we enter Q2 trading period.

Long gold at $ 1620.00 target $ 1630 with a stop loss at $ 1611.50.
Long gold at $ 1592.50 target $ 1618 with a stop loss at $ 1575.00 - In Progress
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1592, $ 1584.86, $ 1580.39, $ 1522 (2012 low)

Silver Technical

Daily chart shows some encouraging buying interest on silver. Prices moved lower on 22nd of March with a low volume and it reversed higher on the 25th of March with a strong high volume. We cannot help but to highlight that once again silver prices did a reversal day with a higher volume, indicating strong buying interest as there are more buyers than sellers. The Bollinger band remains tight and there is no outbreak to the downside, suggesting that a market bottom is in place and we could be witnessing higher silver prices.

Despite such encouragement, we will not get carried away due to a dominant US dollar which continues to cap any rallies and we have on many occasion repeat caution of any silver trade. Unless silver can trade above $ 29.50, we will remain bearish and felt that there is too much volatility (and non-volatility) to take a position.

Long silver at $ 29.40 target $ 29.80 with a stop loss at $ 29.15
Short silver at $ 28.20 target $ 27.60 with a stop loss at $ 28.40 - Stop Loss Triggered.
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.33, $ 27.93, $ 27.50

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.

28 Mar 2013 | Categories: Gold, Silver

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