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Gold & Silver; Ticking Time Bomb

The media representation as we welcome the month of September is like a ticking time bomb. Investors and traders are safe in the knowledge that tapering has been priced in but many still argued if the equity market has really taken that into consideration. With the current Fed chairman leaving and a new one to come in soon, tapering will happen and the question now is how much to taper? US economic data has been rather supportive for the Fed to take action. Initial reaction was the outflow of on highly QE fuelled commodities, then the emerging economies (withdrawal symptom) and the final piece on the jigsaw a deep correction in the equity markets. However, can tapering continue or will it be a one off event followed by additional QE depending on future economic data? The Fed has been rather poor at estimating future economic data, thus dictating certain policy will take time to see the real effect.

Meanwhile, we felt that tapering effect is on its way out and losing its appeal - just like the initial launch of QE 1 followed by 2 and then 3. A change in sentiment in the gold and silver market seems to be playing on the background. The build-up to tapering week will garner some downside interest and it will be a healthy pullback for both metals. Looking ahead though, Syria will continue to be a problem child and such scenario will provide support on safe haven assets. We are making the case that in the short term we see continue pressure on the downside on gold and silver but both will find support before resuming higher. Both market seems to setup for “sell the rumour, buy the fact” scenario.

Gold Technical Outlook

Daily Chart
Rejection at $ 1438 and $ 1418 area confirmed more downside pressure as we continue to trade within the uptrend channel line. The lower channel line will provide substantial support and only a break and close below $ 1350 will allow the bears more control to take it as far as $ 1270. However, should gold managed to stay above and put on a rebound, we see further upside potential. Trend continuation is in favour here and we argue for higher prices as long as the situation remains supportive. We remain vigilant on the indicators but would advise buy on the dips with a tight stop loss.

Resistance: $ 1434, $ 1445, $ 1475 Support: $ 1373, $ 1366, $ 1353

Traders Notes: Short at $ 1345 stop $ 1353 target $ 1300. Long at $ 1356 and $ 1366 stop at $ 1348 target a rebound to $ 1430.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6- 12 months)
Bullish - target 1475 Bearish - target 1353 Target $ 1500 / $ 1600

Silver Technical Outlook

4 hour Chart
Given how the recent gold price has pulled back, silver also failed to break above previous high and rejection comes in at $ 24.50 area. Minor support comes in at $ 23.10 area and then the 38.2% retracement line at $ 22.85. Failure to hold on the next support at $ 22.15 could further escalate selling on the white metal. At the moment, the biased remains to the downside as we continue to monitor the weekly outlook too (will be posted next Monday).

Resistance: $ 25.12, $ 25.40, $ 26.79 Support: $ 23.70, $22.80, $ 22.20

Traders Notes: Buy if break $ 24.75 and add on the break of previous high. Short the metal if it breaks and close below $ 23.50.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6 - 12 months)
Retest $ 22.00 and $ 21.70 area Expect consolidation to retest support at $ 22.70 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. 

06 Sep 2013 | Categories: Gold

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