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SHARPS PIXLEY Is Gold having a personality problem? Funds prefer Equities to Bullion

Lagarde - no time to relapse so no time to relax even if we avoided the collapse in 2012. She added, Euro policy implemented in 2012 has shown positive signs and encouraged politicians to keep the momentum and avoid complacency.

German Ifo Business Climate climbed to 104.2 from 103.1 as forecasted which has sent the Euro surging. It suggests that Germany is the heart of growth in the Eurozone and it looks set to continue at the moment. The German Dax rose higher to 7818 as market participants are more optimistic on the business outlook. Elsewhere, the other Eurozone partner is not enjoying such good numbers especially Spain and France. In addition, the strong Euro may not benefit trade competitiveness in the long run. The road to recovery is a rather long and one sided event in the Eurozone.

To make matters worse, the UK economy contracted and could enter a Triple dip recession. The economy is essentially flat and analysts predicted that GDP will not return to the level seen in the first quarter of 2008 until the first half of 2015. The question now is will George Osborne, the Chancellor ease off the tight austerity plan?
On-going issues on currency war escalated as South Korea raised concern of the strong Won while facing stiff competition in the same industry against the much weaker Japanese Yen. Japan’s Finance Minister Taro Aso rejected the claim that they are manipulating the JPY to orchestrate a weaker Yen purely for its own economy.


Short Term: Last Friday, gold prices opened lower and tested $ 1663 which is the 200 DMA before some buying interest pushed it back above the $ 1670s level. At the moment, gold is still consolidating after its last failed attempt on $ 1700. We may consider shorting the market should it close below the 61.8% retracement at $ 1653 area.

Medium Term: The current support level on gold is at $ 1661 and $ 1653 respectively. Gold has not reacted positively on bullish bullion news and does not seem to correlate well with currencies or oil. We are concerned with the multiple personality that gold has evolved as investors draw a blank conclusion. Chatters among Asian gold dealers are to wait for lower prices before entering the market (some prefer $ 1650) and the lack of upside momentum could possibly be the after math of a lower demand from India after the increase in tax import duty.

We are at best neutral on gold and look to only buy in a dip. US fund traders are bullish on US equities in general and felt that funds are leaving the safety of gold for a higher return vehicle. Look to buy at or below $ 1640 and hold long since we believe there is strong buying interest.
Resistance: $ 1695, $ 1696, $ 1697 (previous high), $ 1700, $ 1710 (50% retracement from Oct high) Support: $ 1669, $ 1661, $ 1653, $ 1625


Short Term: Silver prices continue to consolidate. Initially, it found support at $ 31.50 areas before an increase in selling pressure which take it down to the 38.2% retracement area at $ 31.23. Silver ETFs also suffered a fall as investors look to lock in their profit after a good run from its previous low at $ 29.27 area.

Medium Term: We maintained our view 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. Should the price found support above 31.00, we would suggest a buy for silver to retest its January high and to complete its sideways range target at $ 33.04 (see chart)

At the moment, standing on the side line seems a better option and only join in the market once we see some good support.
Resistance: $ 32.47 (month high), $ 33.54 (downtrend line), $ 35.35 (October high) Support: $ 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 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.

28 Jan 2013 | Categories: Gold

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