SHARPS PIXLEY Gold lacklustre awaits FOMC statement
PM Abe continued on his relentless assault on the BOJ and today he repeats his request for the bank to act on the 2% inflation target. In addition, he mentioned that the fiscal spending will not be forever and that once growth and inflation is attained then raising taxes will be viable.
Meanwhile, bond
traders are worried that the Fed may cut short QE program as early as
the end of 2013 which could indicate a possible rise in interest rate
to curb potential rise in inflation. This argument is based on the
latest media frenzy that the US economy is on the road to recovery.
Such argument is also boosted by a better economic data from the Euro
zone as well as verbal confirmation from European leaders that they
are out of the crisis. In addition, China better than expected GDP
numbers lend a hand to the current optimistic equities market.
However, is this optimism a sustainable one?
Expect a volatile
trading week as we host several key data such as ADP non-farm change,
FOMC statement and US unemployment rate.
Gold
Short Term: Gold
opened this morning with a positive note after founding support and
retested $ 1665.00. Prices remained unchanged for most part of the
Asian trading hours but as London opens, prices start to break lower
and tested support at $ 1652.10. Our last commentary mentioned that
support is close to 61.8% retracement line that we plotted at $
1653.00. The lack of physical buying is one of the reasons but
traders are also being cautious and most stayed on the side lines -
awaiting the FOMC statement. We are on the side lines for now and
look to buy in the dip should gold price break below $ 1650.00.
Medium Term: We
see a potential Head and Shoulder pattern emerging on the US dollars.
If the neckline is broken, the dollar could weaken further and this
could benefit gold. The US debt ceiling has been raised for a limited
amount of time (through to 18th May) and sooner or later
more negotiations may lead to market uncertainty. Ratings agencies
such as Fitch has already warned that should the automatic tax cut is
activated, the US economy could face recession. In addition, we are
in a possible midst of a currency war that could further devalue
paper money. Smart investors will have to build a decent portfolio to
hedge against inflation and potential currency debasement.
|
We are at best neutral negative on
gold and look to only buy in a dip. Today low volume trading
suggested that many traders are on the side lines and take cue
after the FOMC statement is out. In the last statement, some FOMC
members expressed their desire to claw back the QE continuous
buying programme. Gold prices took a dive after that remark and V
spike up on the daily chart.
Resistance: $ 1695, $ 1696, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1653, $ 1635, $ 1625 |
Silver
Short Term: Silver
failed to hold on several key supports and could potentially target a
triangle bottom. After finding support at $ 30.74, silver prices
reclaimed the $ 31.00 area this morning and tested $ 31.19 before
selling pressure pushed it down to consolidate further. It failed to
hold on to the downtrend line at $ 31.50 then the 38.2% retracement
line at $ 31.23 which suggest further weakness in the short run.
Silver dipped lower after a much better US durable goods data and
found support at $ 30.74. Given that silver is acting like a safe
haven rather than acting positively to better economic data from the
US, we would suggest caution.
Medium Term: There
are potentially 2 scenarios that is plausible - depending on the
economy, US dollar as well as gold prices. Silver prices could find
support at the 61.8% retracement line at $ 30.47 and found some
buying interest. It could potentially lead to a bullish rally to test
the downtrend line at $ 33.00 on the daily chart.
The other scenario
we envisaged is where silver prices failed to hold on to $ $ 30.47
and break lower to test January low of $ 29.25. Should prices reacted
bearishly, it may not bode well in the interest of long term
investors who seek an alternative to gold investment.
|
We would like to short the market
should $ 30.70 gives way and target the 61.8% retracement at $
30.48
Resistance: $ 31.23, $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 30.62 (200 DMA), $ 29.25 (January low) |
Currencies
| Currencies | Value | Change comment |
| Euro | 1.3448 | 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 | 1.0413 | AUD failed to hold the 1.045 area and now looking for support. |
| JPY | 90.67 | 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 | 79.81 | A constant risk of H and S formation forming but should that pattern fail then a stronger dollar to be expected. |
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