Gold & Silver; Volatile June
Bullion Round Up
The Nikkei was the highlight of the week at the beginning of May - posting all time high and once again it stays in the spotlight as it endure severe correction. Both events were unprecedented as the BOJ rolled out the Abenomics plan and injected the economy with large amount of quantitative easing. Inflation target of 2% is set and PM Abe vouched to open more trade routes in order to bring back Japan glorious days. The market sell the Yen in droves, the Nikkei rose as companies are expected to hit bumper profit as they are more competitive. However, there is always a “but” in the current aggressive policy. The volatile Japanese Government Bonds (JGBs) sent mixed messages and BOJ Governor Mr Kuroda did not communicate appropriately to the market. Yen started to strengthen and the stock market took a beating. Unintended consequences such as the above put a stop to the rallying US dollar and global equities are suffering although not at the same rate as the Nikkei.
We continue to expect that global central bankers will remain accommodative. The ECB have cut interest rate and the Troika have eased austerity programmes on several troubled countries. Promising more time and a relax deficit reduction so as to promote growth. The Eurozone economies continue to face contraction and rising unemployment. The systematic risk of undergoing further austerity may do more harm than good. Mr Draghi may could either talked down the Euro further in this week meeting or he could come up with additional new policies. The market is watching what he could do to help the recovery in the Eurozone. There were talks of introducing a QE programme by the ECB but no real confirmation as for now.
Economic data that we are watching this week are Euro manufacturing PMI, US ISM manufacturing index (Monday), US Trade Balance (Tuesday), Euro GDP quarterly data, US ADP nonfarm employment change (Wednesday), GBP and Euro interest rate decision (Thursday) and US nonfarm payrolls and unemployment rate (Friday).
Last Friday was the end of week and end of month trading with gold setting the tone with a sell off. Prices rose to a high of $ 1422 due to a weaker US dollar but late afternoon better than expected US data pushed dollar index higher. Selling escalated and gold gave back all the gain made after overcoming $ 1400.00. Late US trading hours, it broke below the psychological level and took our previous support $ 1396.00. The bullish set up made is put into question once again as the US dollar could reign supremacy and gold could only hope for that eventual short covering.
Looking forward, a short term rally in a bear market is to be expected. Another bout of short selling opportunities is in the making and we would not be surprise that resistance at $ 1487 will be strong.
|Resistance: $ 1423, $1437, $ 1438 Support: $ 1390, $ 1373, $ 1325|
Traders Notes: Longs are taking positions at $ 1398, $ 1400, $ 1406 and $ 1414 with a stop loss ranging from $ 1373, $ 1385 and $ 1390 area. Profit target sets at $ 1424, $ 1445 and $ 1460 area.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-3 months)|
|Bullish - target $ 1425 at least||Bullish - target $ 1460||Bearish - target $ 1280|
After a one day swing higher, Silver took another sell off in the end of the week trading session. The strong US dollar took gold and silver lower - with both metals giving back all the gains made. Despite that, Silver managed to find support at previous pivot is of $ 22.20. The hourly chart shows an oversold market but the 4 hourly charts say more downside can be seen. A break below $ 22.00 will add further selling pressure but we felt that buyers will appear and push the market higher from here. In the meantime, further weakness can be seen as the market struggle to recover.
|Resistance: $ 23.19, $ 23.65, $ 25.59 Support: $ 22.05, $ 19.66, $ 19.00|
Traders Notes: Longs are taking positions at $ 22.40 area but with a wide stop loss at $ 21.75. Potential profit area comes in at $ 23.20 area and others are targeting higher numbers.
|Short Term (1 week)||Medium Term (1-3 weeks)||Long Term (1-6 months)|
|Bullish - Break $ 23.19||Bullish - Retest $ 24.50||Bullish - a potential bull run?|
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