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Gold & Silver; Technically Weak

Bullion Round Up

The Chinese are back from their 3 day public holiday but we are not surprised at the lack of interest in bullion. From the beginning of this week, gold has continued to trade lower lows and technically looks weak. More downside risk is expected after gold failure to conquer and hold above $ 1400.00 level. Several analysts have called for lower numbers and a possible revisit of $ 1338 and $ 1321 level in the next few weeks. Technically, this is highly possible with the addition of a bearish sentiment overshadowing the market. Despite numerous environments that support a higher bullion prices, gold failed to shine and once again indicate investors’ lack of interest for the safe haven asset. Given the lack of financial crisis and uncertainty, the great asset reallocation has shifted from safe haven assets to other high yielding investments - such as the stock market.

Central banks around the world are busy debasing their currencies by printing new money but the lack of inflation in the economy reduce the need to hold gold as a hedge. The US housing market is recovering while the stock markets are generating a positive outcome which improves market confidence. Talks among Fed officials to reduce the current QE programme also added strength to the US dollar index. Gold astronomical rise was in part due to Fed easing programme - and the reduction of easy money could well reduce the need to hold gold. We have seen heavy redemptions and outflows from gold backed ETFs as hedge funds look to invest elsewhere. The outflow started after gold hit previous high of $ 1800.00 (October 2012) and it has continued in the current downtrend. Previous support at $ 1525 now turn strong resistance, gave way and prices hit to a low of $ 1321 in a space of 2 trading days. Heavy liquidation and panic selling lead the way. Meanwhile, gold did rebound from the low but has continuously failed once it hit above the 20 DMA.
Looking forward, gold remains under the bears control for some time but we are keeping a close eye on a possible rebound once the sellers are exhausted. The US dollar index continue to affect bullion prices but we do take note that the DYX is contained in a downtrend channel and poised to break lower if it fail to hold on previous low of 81.07. Global equities are also facing dilemma as the bulls are trying to push prices higher to continue the rally. We continue to question the viability of a higher equity prices when company earnings fail to reflect or justify the current prices.
The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1373 followed by $ 1367, $1354 and $ 1339. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

Gold held well above $ 1373 area after a retest of $ 1365 - currently rebounding higher on the back of a weaker US dollar index. Other commodities such as Crude Oil July contract also posted higher numbers. Meanwhile, the Japanese Yen continue to strengthen and add pressure on the Nikkei as well as other stock market. Gold prices hit higher after a lacklustre European trading hours and volatility sets in the market as dollar index hit as low as 80.88 areas well below its 200 DMA. We continue to expect a sell in any rallies that gold made. A break pass $ 1367 will trigger lower prices around $ 1355 to $ 1345 area. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1367, $ 1355, $ 1325

Traders Notes: Short gold as it breaks trend line at $ 1390 with an open target - stop loss stands at $ 1402.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bearish - target $1361 Bearish - target $ 1340 Bearish - target $ 1280

Silver Technical

Once again, silver hit a high of $ 22.02 on the back of a weaker dollar index and sell off in equities. We remain disappointed at the lack of momentum to push for higher prices and this further indicate that the rebound in prices is minimal and rallies are to be sold. The metal put higher low but lower high which indicate further weakness ahead. We are not surprise to see further selling pressure in this market if the dollar rebound higher. A break below $ 21.00 will open the floodgate to previous low at $ 20.00. Silver continues to trade in a downtrend and it broke below its 20 DMA after the selloff. Only a break above $ 23.35 will it encourage the bears to do more short covering.

Resistance: $ 22.20, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00

Traders Notes: Stay on the side line.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bearish momentum Bearish Bullish - a potential bull run?

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. 

13 Jun 2013 | Categories: Gold

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