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 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)
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
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