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Precious Metal rises post FOMC - Sharps Pixley

Today, Asian markets fell on profit-taking after a negative US data showed the economy shrank in the final three months of 2012. This is in contrast to yesterday markets that ended higher when the Tokyo stock exchange jumped 2.28% to close at the highest level in 3 years - mainly due to a weaker JPY. It comes to no surprise since global investors are more optimistic given the recent economic data that the Eurozone is recovering and the US market is growing albeit at a slower pace.

The Fed decided to stay on course with its low interest rates and ultra-loose monetary policy as expected. Bernanke restated that the economy will need the stimulus to sustain its current growth as well as to tackle the unemployment rate. The US dollar index continues to fall throughout the course of Wednesday which benefited the Euro.

There is a host of other economic data due from the US before the end of this week. The most important data post FOMC is the non-farm payroll, unemployment rate as well as ISM manufacturing index of the US economy. We are expecting a better non-farm data but unemployment rate will remain unchanged. Precious metal investors will take cue from these data after digesting the rather similar FOMC statement (from previous January) and we expect volatile trading for the rest of this week.

Gold

Short Term:
Gold rallied on the back of continuous QE programme that the Fed embarked. There was one dissent Fed member, (Eshter George) who warned of the potential damages for further easing. Gold recent performance has been questioned by the bull camp as market optimism lead to outflow of funds from treasuries to stocks. A shift to stocks from bonds is likely to happen. Short term investors are generally worried with the lack of a catalyst for the gold price to rally. Gold looks set to range trade between the $ 1652 to $ 1697 area in the next few days. A break below the support area of $ 1652 would give way to more selling pressure and could retest the January low at $ 1625.00. However, should gold gain momentum on this rally and break $ 1700 we will turn more bullish.

Medium Term: Gold prices break through the uptrend line $ 1668 and overcame $ 1674 buy stop we recommended on our last commentary. The catalyst came from the negative US 4th quarter GDP data, gold retains its gains and continues to erode the other resistance of $ 1679 to break higher. We last mentioned on the daily chart that gold has got a morning doji start that could indicate a reversal pattern. In addition, this proves that gold found a solid support at $ 1650 areas.

We have an open position at $ 1674 with a stop loss at $ 1668 targeting to take profit at $ 1697 which was the previous high. Resistance: $ 1668 (uptrend line), $ 1696, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1653, $ 1635, $ 1625



Silver

Short Term:
Silver Eagle sales surged to all-time highs in January after halting its sales for over a week. Analysts suggest that the rising “currency wars” are encouraging investors to diversify and protect their wealth via physical assets. Silver prices rose from a low of $ 31.25 to $ 32.15 before the release of the FOMC statement. It found support at the 50% retracement level of $ 30.85 and managed to close above various resistances. There is potential for silver to break higher and take out the January high of $ 32.469.

Medium Term: Bullish momentum returned to silver prices after surprising negative US data. It triggered our buy stop at $ 31.60 and has taken out our targeted resistance at $ 31.81 and continuing higher. The next resistance is the previous January high of $ 32.469 and with this in mind we would like to place $ 32.30 as potential take profit area and raise our trailing stop. A potential bullish engulfing pattern is emerging but we are still cautious since the up and coming non-farm payroll data will play a greater significance.

Our buy stop is triggered at $ 31.60 and we are sitting tight on this one as current trend pin point to an upside buying interest.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 31.81, $ 31.23 (38.2%), $ 30.60 (200 DMA), $ 29.25 (January low)



Currencies

Currencies Value Change comment
Euro 1.3570 Eurozone economic sentiment rise to 89.2 in January compared to previous 87.8. In addition, Italy bond auction went smoothly with improved yields and cover.
AUD 1.0400 Consolidating after a gain of 0.93% from last week low of 1.0380.
JPY 90.90 It does not come as a surprise after a dismal export figures. In addition, there were more remarks by PM Abe insisting BOJ to fight deflation head on. Expect JPY at 90.00 - 95.00 in the next few months.
US Index 79.26 This is the 3rd consecutive day that the US dollar index fell. This week high was 79.93 and has significantly drop 0.83% post FOMC statement.


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.

31 Jan 2013 | Categories: Gold, US

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