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SHARPS PIXLEY Gold and Silver consolidate further - Upside remains intact?

Chinese better than expected manufacturing numbers, expanded at the fastest rate in two years. The index rose to 51.9 in January compared to 51.5 in December. Meanwhile, Japan logs a record trade deficit in 2012 according to the Japan Ministry of Finance. Overall exports fell by 5.8% in December from a year earlier due to the on-going island dispute between China as well as a strong Japanese yen for a good part of 2012. It was not all business in Asia as North Korea launch another nuclear threat, this time to target the US.

European market started with a flurry of poor data from the French PMI that was below expectation and Spanish higher unemployment rate at 26.02%. Initially, Euro sell off on the back of the poor data but then regained grounds after a better than expected Germany PMI numbers. Such disparity is a major concern and could well paint a confirmation to IMF’s prediction for the Eurozone in 2013.


Short Term: Gold prices was testing to erode its previous January high of $ 1697 for the 3rd consecutive times but failed and retraced back - initially found support at $ 1683 before heading lower. It then found support at $ 1669 area which was the 38.2% retracement from January low of $ 1625. Analysts deemed this as a bout of technical selling after prices failed to break above the key technical resistance level. We did warn on our last commentary, should gold failed to take out its previous high then a bearish sentiment will set in.

Medium Term: The current support level on gold is at $ 1669, $ 1661 and $ 1653 respectively. At the moment, the chart pattern indicates profit taking as well as weak long hands getting out of the market. Only if the price breaks lower than the 61.8% retracement level at $ 1653, we will be bearish.

The positive in flow in gold ETFs, Russian central bank continuous buying of gold to diversify as well as the nuclear threat from N. Korea does not seems to carry that much weight on gold prices. We are at best neutral on gold and look to only buy in a dip.
Resistance: $ 1695, $ 1696, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1669, $ 1661, $ 1653, $ 1625


Short Term: Meanwhile, silvers prices rallied to a new January high of 32.50 but unable to sustain the gains. The selling escalates after the Asian trading hours and silver prices found support at the 23.6% retracement level and currently sitting at $ 31.72. Further support is available at 31.60 (previous breakout level), $ 31.23 (38.2% retracement line). As per our last commentary, we locked in our profit at $ 32.05 as failure to hold on to its gain and the $ 32.00 is a major concern.

Medium Term: The chart pattern did not paint a very bullish picture on silver after its attempt on the January high of $ 32.47 level. Profit taking and some long liquidation took place and silver will have to consolidate further. We argued that silver has got the potential to find support and retest to take on its previous high. It may just need a little time to catch its breath.

At the moment, standing on the side line seems a better option and only join in the market once we see some dips.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 31.74 (uptrend line), $ 31.23 (38.2% retracement), $ 29.25 (January low)


Currencies Value Change comment
Euro 1.3372 The Euro put up a positive day and reached a high of 1.3393 on the back of more upbeat views of the Eurozone. We have a positive German PMI numbers that propels the market higher.
AUD 1.0458 Technical selling on the AUD after failing to hold on at 1.0500
JPY 89.97 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 79.93 The US dollar is relatively strong and in fact gained a high of 80.15 after the better than expected jobless claim 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.

25 Jan 2013 | Categories: Gold, Silver

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