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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 Technical

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

Silver Technical

During 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

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. 

14 May 2013 | Categories: Gold

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