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? |
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06 Sep 2013 | Categories: Gold
