Gold & Silver; Running out of Steam?

Weak physical demand from China dominates the headline as traders continue to talk down the price of gold. Report from Reuters added that only demand should pick up if gold is trading in the range of $ 1250 to $ 1300 level. Gold started the week with sellers taking the yellow metal to a low of $ 1313.56 before buyers enter the market. Upbeat economic data from China also failed to lift the equity market. Silver faced heavier selling pressure to test $ 21.27 area before retracing back to $ 21.81 area. We are cautious as this is the end of September which could see more volatility in the market place as traders look to position themselves for October. Talks of tapering in October have once again reignited the Bear camp but most analysts felt that December carry higher probability. In our view, the October FOMC meeting might be used as a platform to announce who will replace Mr Bernanke and the new Chairman will then carry the first task of tapering in December. Meanwhile, the US debt ceiling is starting to heat up but most analysts view the extension of the ceiling is imminent. Given how fragile the current economy and government are, borrowing and money printing seems to be the way forward.

Gold Technical Outlook

Daily Chart
Sellers dominate the market place after a run higher on no tapering news. Rallies were sold hard and most gains returned as gold head back to support at $ 1313 level where it started to break higher post FOMC statement. Technically, it remains weak as it failed to break above $ 1378 area which is the much needed area for the bulls to retain control. The outlook remains weak and further pullback looks imminent. David Govett of Marex Spectron added that traders are unlikely to establish new long positions given that it is end of the month. Talks of tapering in October have also dampened the mood in the Bull camp. A break below and close below $ 1313 means that a retest of $ 1290 is next followed by $ 1275. Should gold break below $ 1275, previous low at $ 1180 seems highly probable.

Traders Notes: Short only if it break $ 1290 level. Going long on a break above $ 1380 - the target will be previous high.

Silver Technical Outlook

4 hour Chart
The technical outlook remains bearish as silver trade within the larger downtrend channel and the price action found support at the lower channel line. Meanwhile, there is a lack of upside momentum as price rally is capped below the 10 DMA. The different moving averages continue to trade lower, indicating that sellers have the upper hand. Currently, the RSI is threading nicely on an uptrend line but the MACD remains in the negative territory. Given that it has not reach market extreme, we felt that further selling could take the white metal lower to test $ 20.25 area.

Traders Notes: Looking to short if it break and close below $ 21.30.

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24 Sep 2013 | Categories: Gold

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