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Gold & Silver; Whipsaw-Day

Bullion Round Up

Note to oneself - today FOMC meeting statement may shed more lights on who could be the next Fed Chairman rather than the topic on tapering. Nevertheless, the market has high anticipation on the result of the meeting that tapering will be in effect as early as September or by end of this year. Several articles from so called “fed-watchers” have moved market and the US equity especially did not take rumours or possible leak kindly. This indicate that the market remain on edge as the Fed could call time on the easy monetary policy that was in place after the financial crisis. A shift in the Fed policy regarding the well renowned QE programme will always make headline news and move market. This is true if we look at how the US dollar index has shed most of its gains made over the last few weeks as the bulls locked in their profit and sell the index after hitting a high at 84.46.

Despite a weaker dollar index, gold failed to capitalize to break previous resistance at $ 1425. It has repeatedly failed to hold above $ 1400.00 as strong selling interests always dominate. Buyers lack the conviction to hold for higher prices given the continuous outflow in gold backed ETFs (although the selling has decreased significantly). Alternative investment in the equity market has certainly exacerbated asset reallocation as the hot money find dividend elsewhere. With a prospect that the US economy is recovering well ahead of the EU and other counterparts, talk on tapering the current QE programme should only give it more positive boost as it suggest that the market can stand on its own. Equity market looks to be a safer bet where more returns can be made at the moment.

Meanwhile, volatility in the market is expected to ratchet higher as we draw closer to the FOMC statement. Our advice is to have helmets on and trade lightly with a tight stop loss - otherwise stay on the side line. The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

Within our previous commentary, we warned that “A break pass $ 1373 will trigger lower prices around $ 1355 to $ 1345 area”. At the moment, downside risk remains and further selling pressure is building up as we approach to the release of the FOMC statement. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower. Otherwise, we felt that a major short covering could be on the cards if the price is right.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1361, $ 1355, $ 1337

Traders Notes: Short gold as it breaks trend line at $ 1390 / $ 1395 with a target at $ 1361 / $ 1355 - stop loss stands at $ 1403 / $ 1425

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-3 months)
Bearish - target $1361 Bearish - target $ 1340 Bearish - target $ 1280

Silver Technical

There is no escaping from the sellers as Silver traded lower as selling pressure continues to mount. The metal traded at $ 22.00 for a while but gave back all the gains made and traded lower at $ 21.54. A weak start to the week as silver made lower high and lower low with most trading contain in the range of $ 21.00 to $ 22.50 area. There were no strong buyers at this price level, instead most are short term speculators dip buying on the market and sell when it spiked higher. Investors favour lower silver prices and we may continue to see it weaken before any rebound rally.

Resistance: $ 22.51, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00

Traders Notes: Stay on the side line.

Short Term (1 week) Medium Term (1-3 weeks) Long Term (1-6 months)
Bearish momentum Bearish 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. 

19 Jun 2013 | Categories: Gold

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