Gold And Silver; Tapering: An Experiment

The market remains choppy as gold has once again faced selling pressure after it broke above $ 1400.00. It is becoming a repetitive ritual as the higher prices above the psychological level is rejected time and time again. The U.S. dollar index rebounded from the low of 82.50 to a high of 82.95, but despite the weakness, gold continues to fail and retain the gains made. An initial break below $ 1405 was enough to send prices lower to break $ 1400.00. Investors are sending a clear message that dip buying will continue if prices dipped below $ 1390 but the short sellers are determined to short those rallies. We are growing sceptical at the rate that gold is going – that the fundamental and technical correlation exists.

Looking forward, a short term rally in a bear market is to be expected. Another bout of short selling opportunities is in the making and we would not be surprise that resistance at $ 1487 will be strong.

Resistance: $ 1416, $1437, $ 1438
Support: $ 1384, $ 1373, $ 1325

Traders Notes: Longs are taking positions at $ 1391, $ 1398, $ 1400, $ 1406 and $ 1414 with a stop loss ranging from $ 1373, $ 1385 and $ 1390 area. Profit target sets at $ 1424, $ 1445 and $ 1460 area.

Shorts are taking positions at $ 1404.50 and $ 1420.00 with a stop loss at $ 1425 area. Profit target is sets at $ 1400 and $ 1395 area.

Silver: It will be a dull market if we do not see wild swings on silver prices. We previously warned that silver prices did not manage to break the previous high of $ 23.19, and indicate further bout of weakness. The white metal gave back most of its gain, but found support at $ 22.39 area. The hourly chart shows a potential rebound from this support line, as the stochastic fast line is pointing higher. However, the MACD is continuing to trade negatively and that may well mean further consolidation before a change in direction.

Technically, it has got room to move higher but it could continue to trade in this range of $ 22.00 and $ 23.50. Only a break above $ 23.35 will encourage the bears to do more short covering.

Resistance: $ 23.19, $ 23.35, $ 25.59
Support: $ 22.37, $ 19.66, $ 19.00

Traders Notes: Longs are taking positions at $ 22.40 area but with a wide stop loss at $ 21.75. Potential profit area comes in at $ 23.20 area, and others are targeting higher numbers.