Gold & Silver; Rebound Stalled!
Bullion Round Up
Gold started the week with a sell-off from last Friday’s close at $ 1448 and settled to a low of $ 1426 during European trading hours. Further weakness in the gold market remains after it broke below the $ 1440 support level. The breakout of its previous trading range of $ 1440 - $ 1480 and failure to overcome resistance at $ 1488 potentially indicate a new downtrend. “The sharp rebound in the yellow metal from two weeks ago was not sustainable due to the on-going capital shifts into equities” - said Gerry Schubert, Head of Precious Metals at Universal Bank Emirates NBD in Dubai. Bloomberg report confirms in their latest article that “Hedge Funds continue to increase their bets on lower gold prices after investors pulled a record $ 20.8 billion from bullion funds this year”. Total holdings of gold in Exchange Traded Products fell by 34.3 tonnes last week, according to data compiled by Bloomberg. Hedge Funds and retail investors are fleeing the gold funds in search of better yield in equities.
Physical demand continues to be the main support but many analysts think that it is a one off event. Physical buyers could stay on the side line for now as prices have risen from the low of $ 1325 to $ 1488 and some may deem it too expensive. A stronger US dollars and continuous outflow from ETFs could be the beginning of a downtrend as the rebound from previous low come to a standstill. Gold prices remain in a bearish mode as continuous outflow of ETFs funds hurt sentiment. In addition, gold prices remain sensitive towards the Federal Reserve decision on their QE programme. Article by WSJ Jon Hilsenrath indicate that Fed members are mapping out an “exit strategy” but unable to decide on the timing. CFTC reports also indicate a bearish picture as speculators are increasing their short positions - betting on a lower gold price.
This week focus on economic data is the German Zew economic sentiment, EU industrial production, German GDP, UK claimant count change; BOE inflation reports, US Jobless claims and core CPI numbers which could be of great interest.
Gold started off with selling pressure in early
Asia trading hours. Prices found support at a low of $ 1426 before
trading in between $ 1439 and $ 1436 level. A break below $ 1424
which is the 38.2% retracement line from the low will give the bears
more reasons to short the market. However, should it hold and rebound
then there is a scope for gold to retake $ 1440 area once again which
was the previous support. Technically, it remains weak and biased to
more downside pressure as the daily chart shows a falling stochastic
and the MACD line which is about to cross lower (trading in the
negative zone). The RSI seems to indicate that gold has room to
retest last week low at $ 1418 and should that break then $ 1404.
|Resistance: $ 1475, $1488, $ 1496, $ 1525 Support: $ 1418, $ 1404, $ 1325|
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bullish - target $ 1475 at least||Bearish - target $ 1400||Bullish - target $ 1600|
the early Asian trading hours, silver prices whipsawed in a thin
market as prices tried to find some grounds between $ 23.83 and $
23.50 area. Silver managed to reclaim higher despite a stronger US
dollars and better than expected US Retail sales data. Silver
continue to consolidate in the descending triangle formation. A break
below $ 23.15 will set off another round of selling spree that could
take it back to revisit previous low at $ 22.00. In the short term, a
break above $ 24.20 will be favourable for the bull as silver will
trade outside of this formation and possibly test higher prices at
either $ 25.03 (50% retracement) or $ 25.75 (61.8% retracement). The
rebound rally lost its steam and silver has not really performed as
well as gold. Technically, the daily chart shows a Bollinger band
that is coming closer to a breakout. At the moment, the risk for
further correction remains high.
|Resistance: $ 24.82, $ 24.91, $ 25.59 Support: $ 23.19, $ 22.88, $ 19.00|
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bullish - if it can break above $ 24.10 it could retest $ 24.45 area||Bearish - break below $ 23.15 could see a retest of $ 22.00||Bearish - a retest of $ 22 is possible and could go lower to $ 21.00 or $ 19.00|
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14 May 2013 | Categories: Gold