Safe haven appeal dwindled and the bears are back in control post Cyprus bailout news. Over the last three weeks, we witnessed how gold fought to rebuild its base at $1570 and that will remain as a key support area for the bulls. March low was registered at $1561 before a strong recovery to break above $1600. We are not surprise that gold will have to consolidate after the gain of $55 dollars over three weeks and it did just that yesterday. Prices broke lower as option traders have strong interest for a gold price at $1600. In addition, the small euphoria in the euro zone added pressure on the yellow metal.
Gold tested the 20-DMA and managed to reclaim $1600 and kept all its gain for the day. Prices remain capped due to the strong U.S. dollar but well supported by the less buoyant stock market that reversed lower. The victim of the day is with European stocks, especially the banking sector as well as the Euro breaking lower to touch 1.283 (at the time of writing).
The daily chart continues to paint a bullish sign on gold revival after testing for support. Yesterday’s low and reverse upside gain create a strong hammer tail that may give the bull a reason to mount another attempt at $1620. Our main concern remains with the strong resistance at that price area where the bears have special interest to keep it low. However, we are near the end of the month and some profit taking could take place.
- Long gold at $1620 target $1630 with a stop loss at $1611.50.
- Long gold at $1606.50 target $1618 with a stop loss at $ 1595.00 – Stop Loss triggered.
- Resistance: $1615, $1625, $1634 (50-DMA), $1650, $1686, $1697 (previous high)
- Support: $1600, $1584.86, $1580.39, $1522 (2012 low)
Silver traders put up with another roller coaster day as prices fluctuate lower to retest support at $28.50 before turning higher. The overextended sell off create a strong tail which indicate another round of strong buying interest whenever the prices trade below $28.60. It has become a repetitive sequence but silver remains stuck and bears are still in full control. Despite that, it does put up a good volume of buying which may help support the current price. However, most silver traders are scarred and remain on the side-line because any rallies are subject to another bout of selling.
Unless silver can trade above $29.50, we will remain bearish and felt that there is too much volatility to take a position. We advise caution on any silver trade and will only get more bullish if $29.50 is given.
- Long silver at $29.40 target $29.80 with a stop loss at $29.15
- Short silver at $28.20 target $27.60 with a stop loss at $28.40
- Resistance: $29.50, $29.74 (38.2%), $30.19 (50%)
- Support: $28.33, $27.93, $27.50