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Gold & Silver; Safe-Haven Resurgence

In the book “Lords of Finance”, Liaquat Ahamed perfectly summed up the history of owning gold - Gold had been used as a form of currency for millennia. That statement will remain true until today as we have seen how the yellow metal form a strong foundation and backbone to protect wealth in times of adversity but also an insurance when the global economy is doing well.

Taking into account of recent events – QE in the Eurozone, Greece political upheaval, Central banks spat, continued occupation of eastern Ukraine and not to forget the same scripts that were repeat again and again – only the US and developed counterpart economies are improving after several stages of QEs, intervention on interest rates and possible hike and last but not least a never ending strength in the equity market has indeed promised quiet a scenario of future domino effects.

As we approach the end of January, the buoyant precious metal market could remain on its track but we are cautious at the pace of recovery. Physical demand could dipped as we begin February should prices continued higher unless we see further bout of strengths from managed funds and hedge funds. Speculative longs are piling in to both gold and silver as global investors realised that the equity market could be prone to a mild correction. We continued to be cautious on the outlook of the global economy as developed nations look to tighten their monetary policy while others are scurrying to reignite the growth engine. Today we see the release of the Federal Reserve minutes as Miss Yellen shall take the centre stage to determine how “patient” the Fed can continue to be as they digest the extent of other financial threats.

Gold Technical Outlook

Weekly Chart

Expect a turbulent moments as traders look to lock in profit and to which many will take the side-line until the dust is settled. Reading from our previous chart commentary, gold resurgence has respected the red trend line resistance at $ 1307. Expect this trend line to continue as resistance in the short term and only a break above it will see further short covering. The risk on shorting the yellow metal remain valid and gold could race higher to $ 1325 should $ 1307 break free.

However, we will continue with our biased view that a healthy pullback will be the best case scenario and will continue to short the yellow metal. This pullback should retest previous resistance now support areas – as long as it managed with a daily close above its 20 DMA at $ 1249, the yellow metal remain bullish.

Trade: With psychological resistance at $ 1300 and then $ 1320 area (downtrend line) we would favour shorting the yellow metal as it will look to pullback to retest previous resistance now support. Short the yellow metal between $ 1282 – $ 1298 area to target $ 1266, $ 1255 and $ 1245. Continue holding short with the above target and stop loss at $ 1308 at the moment.

20 WMA

50 WMA

100 WMA

1215 (+4)

1267 (+/-)

1306(-3)

Silver Technical Outlook

Weekly Chart

There is a continued risk that Silver prices could retest previous low and current resurgence may not last. We see a gradual retest of the breakout from the long term trend line at $ 16.10 and should prices break below that then further selling will resume. In the meantime, Silver prices will bide it’s time to retest several previous resistance now support areas. The bear rout could be at the end of its tale and a period of further consolidation with solid building of a base is the picture that we painted for the next few weeks to months.

Trade: Trade only valid this week to short Silver should it retest $ 18.40 with a stop loss at $ 18.60 to target $ 18.05 then $ 17.55 area.

20 WMA

50 WMA

100 WMA

16.78 (+17)

17.93 (+/-)

19.12 (-4)

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 Jan 2015 | Categories: Gold

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