A picture tells a thousand words. Therefore, the chart below helps summarise our analysis in one simple word -- Liquidation! With prices dropping like a brick, the weak-hand investors are fleeing the market but most are told that their positions have been liquidated. Margin calls popped all over as investors scrambled to cover their losses. Sentiment grew from a possible rebound from Friday’s close of $1479 into panic selling that eventually dragged gold to a low of $1385.
Gold Sentiment
In our last commentary, we advised caution and will continue to stick with it (see below) -- However, gold buyers remain sceptical and maintain a cautious view on another gold rally. The sentiment has grown from bad to worse since physical buyers will wait until the dust settles. It is always hard to catch a falling knife and best to let the market stabilize before placing any positions.
The market will remain turbulent and volatile. This week gold remains at risk of further drop in price before finding a reasonable rebound (the perverbial 'dead-cat bounce') before further selling to determine a bottom.
- Short gold at $1475 target $1460 with a stop loss at $1480 (Profit)
- Short gold at $1555 target $1525 with a stop loss at $1561 (cancelled)
- Long gold at $1578.50 target $1603 with a stop loss at $1555.50 (Stop out)
- Long gold at $1576.00 target $1603 with a stop loss at $1580.00 (Profit after SL breached)
- Resistance: $1572, $1590.4, $1592, $1604, $1620
- Support: $1380
The volatile white metal has not failed to put in a spectacular price movement. Silver continues its downtrend channel as the metal was heavily sold during the early Asian trading hours on Monday. The selling never abated and eventually found support at $22.96 where it rebounded to $23.58. Another grim day as silver buyers was nowhere to be seen. The prospect of white-metal rally seems unlikely but a bottom is due. We will not guess how big the damage will be but mainstream media have suggested that silver could retest previous low at $24 and, in a worst-case scenario, back to $19 an ounce.
It's impossible to suggest where the bottom will be, but staying on the sideline is a better option.
- Long silver at $27.45 target $27.85 with a stop loss at $27.15 – Profit
- Long silver at $27.65 target $28.20 with a stop loss at $27.75 (SL hit)
- Resistance: $28.35, $28.87, $29.50
- Support: $24, $19