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Gold & Silver; Who & How Much?

European car sales resumed declining after registrations fell 4.9% (Bloomberg) due to the rise in unemployment and on-going recession in the Eurozone region. Car makers remain wary of any ‘green shoots’ and most remain cautious while others forecast more contraction ahead. With Larry Summers out of the race for Fed chairman position, the equity market assumed that a more dovish chairman will be elected. Miss Yellen fits the bill and she is the favourite for now. What we like to do here is to digest what has been priced in pre FOMC and what could be a real surprise that is worth to think about. Market positioned for some sort of tapering but confidence on the amount to taper remains low. The recent price action in the dollar index showed weakness in the amount of tapering. Unless the Federal Reserve is ready to commit to a large amount of reduction, we see continuous weakness in the dollar which could aid the precious metals. However, we also cannot ignore that the recent equity rally is based on the fact that dovish monetary policy will remain even before the FOMC statement is release. The market is rife with forecasts and predictions but traders remain vigilant to pick up on every scrap of clues about what could happen.

Meanwhile, we continue to feel that the tapering effect will fizzle out after the FOMC statement and the next big item will be the US debt ceiling. On that basis, we felt the precious metal will remain well bid as long as it can trade above its support level. We remain cautious of a possible “sell the rumour, but the fact” scenario.

Gold Technical Outlook

Daily Chart
On the short term charts, the indicators are flashing an oversold gold market but the daily and weekly chart indicate a stronger downtrend is in the making. Further pullback to retest support level has opened the possibility of revisiting previous low. The daily gold chart shows how further weakness after the break lower from the corrective uptrend line. Other indicator such as the MACD suggests downside resumption. The RSI is hovering lower near the oversold area at 38.46 but prices could go lower. The psychological barrier at $ 1300 will provide some solid support but should that break, the price is most likely to retest previous support at $ 1275 area. Meanwhile, the weekly chart also supports the scenario for lower price after the end of the corrective rally. Resistance now stands at $ 1355 area but we expect range trading for now before the FOMC.

Resistance: $ 1434, $ 1455, $ 1525 Support: $ 1275, $ 1210, $ 1180

Traders Notes: Short at $ 1345 stop $ 1353 target $ 1300. Stop loss moved lower to $ 1335 in order to secure some profit on the initial short. Looking to add on short should we break below the $ 1270 area.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6- 12 months)
Bearish - $ 1280 Bearish - $ 1215 Target $ 1500 / $ 1600

Silver Technical Outlook

Daily Chart
Despite dollar weakness, silver failed to rise any higher given that gold failed to shine as well. Daily chart shows that the downside resumption sets to continue and silver found some support at $ 21.40 area. Should the price break below $ 21.35, it will trade in previous uptrend channel line with the next support at $ 20.15 area. Technically, more pullbacks is expected with the MACD heading lower and RSI indicate that there is more room for this pullback.

Resistance: $ 22.45, $ 23.90, $ 24.53 Support: $ 21.40, $20.80, $ 19.50

Traders Notes: We closed our short position after hitting the stop loss at $ 22.00. Looking to add short cautiously should the opportunity arise. Otherwise, remain flat ahead of the FOMC meeting given how volatile silver can be. Short at $ 21.35 target remains in place.

Short Term (1 - 3 weeks) Medium Term (1 - 3 months) Long Term (6 - 12 months)
Possible retest of $ 20.60 area Bearish $ 20.00 area 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. 

18 Sep 2013

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