Gold & Silver; Where is the demand?
Bullion Round Up
A slower than expected Chinese PMI numbers added more selling pressure on Silver. The industrial metal depends heavily on a better set of economic data to determine a higher demand. Meanwhile, Gold retested $ 1433 before giving back all its gain in the early Asian trading hours. The recent price rally was sustained by a strong physical demand as well as short covering rather than any real buying interest. This argument is further supported by the continuous outflow of gold backed ETFs. Reuters reported that the holdings on SPDR gold trust fell 1.63% to 1104.71 tonnes from the previous standing of 1123.06 tonnes. We have highlighted in our previous commentary the distortion between the strong physical demands against those on the outflow of money in ETFs. A probable explanation regarding the distortion is the growing distrust of ETF among long term investors who may have opted for physical product.
The battle between the bulls and bears continue to intensify. Gold bulls have retreated after the sharp selloff but bargain hunting at the low price has lifted the oversold market above the 38.2% Fibonacci retracement line. Prices have been consolidating after hitting a high of $ 1439. Meanwhile, the gold bear’s objective is to add selling pressure in an attempt to drag the price below $ 1400.00. After the recent selloff, the market is poised to break lower and technically, it continues to thread in a bear market. The recent rally is more of a short covering by the sellers and possibly relief long term investors to cut their previous holdings or initiate a new short position.
Gold Technical
After a disappointing Chinese PMI numbers, gold headed lower and has been trading in a downtrend (see chart below). Prices did not manage to retest previous high at $ 1439; instead it only managed $ 1433 and went lower. There was a brief moment where gold retested the upper range of the downtrend before selling pressure took it lower. Technically, gold has retested the 38.2% Fibonacci retracement line and it may have had a good run. In many of our last commentaries, we have cautioned that prices may break higher but the market will resume lower after this rebound. At the moment, we are in the midst of this tight range and a break below $ 1404 will give the sellers more ammunition to push it lower.
The current support now stands at $ 1394, $
1380 and $ 1366 with resistance sitting firmly at $ 1421 and $ 1433.
Only a break above $ 1440 will give gold a good chance to retest $
1456 and $ 1487 area. We felt that gold could go lower on this basis
unless physical demand managed to sustain the current selling
pressure.
Resistance: $ 1424, $ 1456, $ 1487 Support: $ 1398, $ 1371, $ 1366, $ 1325 |
Short Term (1 week) | Medium Term (1-3 weeks) | Long Term (1-6 months) |
Bearish | Bearish | Bearish |
Silver
Technical
The worse than
expected Chinese PMI data sent silver prices lower and it found
support at $ 22.64 but put in a negative close. In our previous
commentary, we warned - There is a lack of buying momentum to push
the white metal higher. It is still consolidating after the
major sell off but the lack of interest from new money may hinder any
real progress. Given the recent weakness, we fear that silver
could go much lower in search for a good support. We are not sure
where the bottom lies but felt that it may retest previous low at $
22.06.
Resistance: $ 24.22, $ 24.91, $ 25.59 Support: $ 22.65, $ 22.00, $ 19.00 |
Short Term (1 week) | Medium Term (1-3 weeks) | Long Term (1-6 months) |
Bearish | Bearish | Bearish |
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24 Apr 2013 | Categories: Gold