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Gold & Silver; The Race to QE

All hail the great governor – heralding the brand new era of more stimulus as Japan enter the new era of print first ask later. The market was astounded and unprepared with the new stimulus programme but was it all clear from the onset that the BOJ will do what it takes to maintain the Abenomics route? Indeed one ould argue then that the market is playing catch up and have not discount the determination of the current political party that is holding the Japanese future economy at ransom. That little stem of growth should be watered with more stimuli and why should they not to? Japan managed to get out of the great deflation and inflation are just picking up. In addition, it makes sense as an export led economy to further strengthen their positions to boost production at home and demand abroad. Inflation will continue to move higher as cost of living on other essential imported goods will trickle in. Soon, companies have to consider wage increase to their aging workforce. For once, the inflation ride will definitely give short term boost that may spur the Nikkei to a new all-time high.

The above short summary of ranting led us to our next victim – the US economy which is deemed to have recovered artificially. Unemployment has stabilised (figure massaging is the key forward) and investors’ confidence has picked up but warning signs littered through the tunnel (with a promise that we shall see that light out of the tunnel eventually) which at the moment will take us yet to another tunnel. We call that being a pessimist but what is the real argument here to back the current recovery?

Just maybe all of the above seems irrelevant as the world economy continue on the path of “artificial recovery”.

Gold Technical Outlook

Weekly Chart

Based on the last weekly commentary, gold has continued its downtrend path after failing to muster any real demand from the bull camp. Rising prices were opportunity to dump the yellow metal as investors see no real benefit in holding the yellow metal. Equity market and a stronger US dollar index continue to sap away any possible foundation for a stronger gold price. With deflationary prospect around the developed economies, the need for safe haven assets is not worth the hassle.

Referring back to our previous analysis, this symmetrical triangle look set to stage a continuous downfall with a potential aim of lower prices. Should we revisit $ 1180 area again; a break below will push the yellow metal into a steep fall. Only if we see strong buying at $ 1180 to put a spin on the short sellers, the yellow metal could target $ 1050 as per Goldman’s analysis.

Resistance: $ 1181, $ 1197, $ 1207
Support: $ 1156, $ 1042

Traders Notes: Breakout of the triangle pattern is the sign for continuous downward trend. Catching a falling knife is a risky trade proposition. A buy at $ 1151 with a stop loss at $ 1143 should allow a trader to target $ 1195.

Short Term (1 – 3 weeks) = Bearish $ 1197
Medium Term (1 – 3 months) = Bearish $ 1050
Long Term (6- 12 months) = Target $ 1300

Silver Technical Outlook

Weekly Chart

Silver resume lower and the solid weekly trend continue to project prices to hit the next gear which could target the white metal to pre-economic crisis era of 2008. Flushing out the speculators is one thing but the pure lack of interest among investors continues to grind any foothold for any foundation to stand on. We expect prices to move sideways before more selling that could give way but expect bargain hunters to stream in with prices at $ 15.50.

Resistance: $ 16.56, $ 16.72, $ 17.85
Support: $ 15.61, $ 14.41

Traders Notes: Downside pressure piling up – sideways trading in the next few weeks but with resumption to the downside.

Short Term (1 – 3 weeks) = Flat
Medium Term (1 – 3 months) = Flat
Long Term (6 – 12 months) = 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.

03 Nov 2014 | Categories: Gold

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