Gold & Silver; Time Bomb!
Bullion
Round Up
Initially, we view gold needs to retest support before embarking on any reversal rally. We have repeatedly mentioned that the last few weeks have been a session of range trading between $ 1560 and $ 1585. Should the upside momentum continue, it has the potential to rally from $ 1600 to $ 1700 if managed funds and retail investors start short covering their positions. Needless to say that gold is still vulnerable if $ 1560 is given and breaks lower to retest previous low of $ 1555 and this could lead to further selling to target $ 1525.
Traders
will start to re-evaluate their position fundamentally and
technically. We have addressed that sound fundamental on gold still
exist and remain supportive of a continuous bull run. Technically, we
admit that the recent selling only exacerbate the already negative
sentiment over the last 5 months. The return on gold in 2013 has not
been encouraging (-5.7%) compared to the DJIA which the year to date
return is an astonishing (10.5%). In a typical oversold market, we
get continuous negative sentiment as well as repetitive bearish news
that discourage investors to look at the facts.
We
have seen some positive bias on gold where investors could consider
going long again. Several points to take into consideration are 1)
oversold market face the threat of short covering 2) gold did retest
lower after a positive NFP data but crawled back higher due to
central bank buying and robust physical demand from Asia and 3)
economic crisis has been postponed but the fragility of any recovery
is still a major concern. We cannot help but to add a 4th
in this particular commentary. When Goldman Sach and other major
banks are shouting to abandon ship - investors should take caution.
The other concern that we have is the increase in anti-austerity campaigns in southern Europe that could politically destabilise the contained crisis. The global economy is highly juiced with freshly printed money. VIX index is soon at all-time low in a volume-less stock market that is making new record via the DJIA and S&P 500. Meanwhile, debt problem remains high and we are experiencing an unusual high unemployment rate in US and Europe. Maybe it is time to wake up and defuse that time bomb before it is too late?
Gold Technical
Short
Term:
At the moment, gold seems to have found a bottom after
retesting support at $ 1561. Physical demand from China has propelled
the yellow metal higher and soon could raise the attention of
investors who are waiting on the side-line to join in. This could add
pressure on the hedge funds and retails investors who were shorting
gold heavily. CFTC report showed that short positions were close to
an all-time high. Short covering could be the next catalysts to push
the prices higher.
Medium
Term:
It may be too early to claim that the bull market is back but
it is better than a lacklustre range trading for the past 2 weeks.
The range trading period indicate that a base is being build and a
bottom has been reached in the oversold market. Gold remain
vulnerable to the downside if buying momentum slows down.
Technically, it should continue to gain higher prices as the MACD has
crossed higher and moving in tandem with the stochastic fast line
crossing higher. We have open a long position at $ 1592 and looking
to target $ 1605.
Buy gold at $ 1592
and target $ 1605 with a stop loss at $ 1588.50.
Resistance: $ 1598, $ 1604, $ 1625 (50%), $ 1639 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1561.4, $1555, $ 1545, $ 1525, $ 1522 (2012 low) |
Silver
Technical
Short
Term:
Silver broke higher and this time it managed to keep its gain.
As of the time of writing, silver prices traded above $ 29.22 which
is the first key step to trade outside the tight range (see chart
below). In our last commentary, we notified our readers of an
ascending triangle on the 4 hourly charts and an imminent breakout
from the Bollinger band. This break seems to confirm an upside
potential in the next few weeks.
Medium
Term:
Our current long position on silver sits comfortably in the
money. Silver traded above the 20 DMA of $ 29.18 and the stochastic
fast line is rising higher. The MACD has also cross higher but remain
in the negative zone. We remain caution on this silver trade and will
only get more bullish if $ 29.50 is given.
Long silver $ 29.15
to target $ 29.50 - stop loss added at $ 28.85.
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.33, $ 27.93, $ 27.50 |
Currencies
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