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Quiet trading ahead of Chinese New Year - Sharps Pixley

Last Friday, we witnesses Eurozone unemployment rate that came in better than expected and stood at 11.7%. Many Euro sceptics think that the rate is still rather high and unsustainable. Final manufacturing PMI also show some sign of improvement despite the fact it is still below 50 which suggest contraction. Over the weekend, PM Rajoy credibility is questioned over a possible corruption scandal. This is followed by the on-going MPS investigation in Italy when the world oldest bank overpaid in a 9 billion euro purchase of rival Antonveneta in 2007.

US non-farm payroll is at 157k, short of market expectation but revision for previous payroll data show a sign that the US economy is creating more jobs. US stocks open higher as they see a positive data on employment while gold investors see this as a continuous QE policy since unemployment rate increases.

This week, we have interest rate decision from the UK and EURO. Market expects Mr. Draghi to cut interest rate since his previous comments indicate such possibility. Friday, all eyes will on Chinese year on year CPI numbers to digest.


Short Term:
This morning, gold in Yen terms traded much higher on the back of the weaker Japanese Yen. Market opened with small buying interest from Asia and managed to push prices up to $ 1673 before giving back its gain and at the moment consolidating. We mentioned in our last commentary that prices will be volatile till the end of last week and we expect prices to trade in a range of $ 1660 to $ 1690. Initially, the gold price moved higher post non-farm payroll data as market see higher unemployment rate as the indicator of continuous QE by the Fed. However, investors remain unconvinced about the short term rally and those rallies were eventually sold on the back of a more positive ISM manufacturing index number.

Medium Term:
Gold has support at previous low of $ 1652 and January low at $ 1625. We remain neutral bearish at this moment and would stay on the side line. Bullish sentiment will prevail once we crossed the resistance level of $ 1686 and January high of $ 1697. In a note, Deutsche bank reminded us again that gold lacks a convincing catalyst in the near term to take it meaningfully higher and instead remains susceptible to opportunistic selling.

We look to short the market only if the support at $ 1652 gives way. In the meantime, gold may need to consolidate further and find support before eventually taking out the higher resistance. Look to buy only at $ 1686. Resistance: $ 1686, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1653, $ 1635, $ 1625


Short Term:
The market opens with silver consolidating from last week positive momentum. Silver prices reacted more positively compared to gold as it moved higher and managed to hold on to most of its gain despite failing to overcome the high made on the 30th January at $ 32.27. We noted that silver has an upside momentum and support are strong at $ 31.00 level. At the current stage, investors are still range trading between $ 31.00 to $ 32.00 areas. We will be more bullish should prices break resistance at $ 32.47.

Medium Term:
We are at best neutral bullish on silver and will look to buy should the price manage to hold on well above $ 32.00 level. At the moment, prices are holding up well above the $31.23 - 38.2% retracement level basis on January (high and low retracement level). In addition, it is above the 21 day moving average of 31.28 that may give good support in the short term.

We will short the market should it fail to hold on above $ 31.00. Looking to buy again should prices break above $ 32.00 and target the January high of $ 32.47.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 31.23 (38.2%), $ 30.60 (200 DMA), $ 29.25 (January low)


Currencies Value Change comment
Euro 1.3640 Rumour has it that the Fed QE2 is used to prop up “foreign banks” based in the US.
AUD 1.0422 This week we are tracking several key economic indicator that may affect the AUD.
JPY 92.80 Expect JPY at 90.00 - 95.00 in the next few months.
US Index 79.22 We are tracking the dollar closely since there is a possibility for a Head and Shoulder. Dollar index broke lower on Friday and tested 78.80 level but managed to climb higher on the back of ISM data.

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.

04 Feb 2013 | Categories: Gold

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