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Gold & Silver; Uptrend Continues

Gold backed ETFs continue to see net inflows but not a great deal of new buying. Physical demand from Asia remains the core to support gold price and there is no denying that higher prices could affect overall demand. Central banks from emerging market show good demand as they diversify into safe haven assets. Comments from NBD weekly precious metal report “CFTC shows that a very large amount of short positions have been cut during this latest flirtation with prices above the $ 1400 level, but the market will therefore rely on new fresh longs in order to bring this market further forward”. We agreed with the above view and see the short term prospect of gold retesting support before moving higher. Our intermediate view argued that gold has the potential to take out resistance at $ 1434 followed by $ 1480 and as high as $ 1525.

Meanwhile, we urged caution as the week gets underway with the release of more economic data that could set a new direction. In addition, we continue to stress market volatility will rise as traders are back from their summer doldrums. The political tension may have eased in Syria but it is never far away from a possible reverse in decision from the US congress. Safe haven assets continue to garner support but prices volatility will escalate further. US dollar index have broken above previous downtrend line and continuous strength here may dampen the mood to hold on long positions. Should the effect and aftermath of tapering fizzled out, investors will have their attention on to the US debt ceiling. All in all, a bumpy ride ahead for the next few weeks on gold and silver but we urged buy on the dips. Shorting both metals is possible if it break below the current uptrend channel.

Gold Technical Outlook

Daily Chart
A retest of support at $ 1353 is possible given that gold failed to close above $ 1400 level on the weekly basis. We expect traders to position themselves with trades between the uptrend channel lines. Given that the MACD is above the centre line, positive momentum on the current trend remains. However, the MACD histogram as well as a possible crossover of the MACD line below the signal line could indicate a small pullback is in the cards. RSI is hovering above the 50 mark and the indicator has not shown an overbought market condition.

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


Traders Notes: Short at $ 1345 stop $ 1353 target $ 1300. Long at $ 1355 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


Weekly Chart
The concern for the gold bulls is the potential end to this corrective rally. Last week close shows a weak candlestick formation (gravestone doji) which could suggest potential reversal. The stochastic fast line is reversing lower while the RSI hit resistance at the 50 mark. MACD may have crossed a tad higher but it is still rolling in the negative zone. If gold managed to close higher ($ 1422 - $ 1430), a retest of resistance line at the weekly 200 DMA - $ 1472 is in the cards, followed by a possible pullback. The weekly chart remind us that gold continue to trade in a Bear market and only a substantial break above $ 1500 to call the end of the correction in the Bull market.


Silver Technical Outlook

4 hour Chart
On our daily chart analysis, we argued that silver has got rooms to pullback after an impressive rally from the low of $ 19.00. Meanwhile, the 4 hour chart could paint several different scenarios. The first is a strong continuation pattern (see below) with second symmetrical triangle in the making. Silver is consolidating its recent gain and the uptrend remains as the chart set up with strong characteristic of a bullish pennant. On the other hand, it could be undergoing a head and shoulder formation – the right hand shoulder is in the making. Only a break and close below $ 23.50 will allow traders to short it and target $ 21.45 area.


Daily Chart
After a successive rally, silver look poised to pullback and the daily chart painted a very nice setup for the white metal to retrace lower. Previous close after a blown-off scenario at $ 25.12 has given the signal for profit taking followed by shorting the metal. Pullback to retest support at $ 23.00 or lower could be in the cards. The MACD is about to cross lower and the volume confirms a falling demand as prices set to see more pullback. RSI has also crossed lower and has got more rooms to the downside. The stochastic fast line has already crossed lower while the slow line is still holding on.

Potentially, a break below $ 22.25 will complete a head and shoulder pattern in the next few weeks ahead. We have the left shoulder and the head is complete but a right shoulder could be in the making.


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)
Consolidating 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. 

04 Sep 2013

About the author

Robert Jillies

Robert is the youngster in the team and comes with a technology background. He is currently adding journalism and fundamental market research to his repertoire.

e: robert.jillies@sharpspixley.com

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