Gold And Silver; Still Vulnerable!

We have been observing the recent change in gold’s sentiment. It may be too early to predict where prices are going, but we cannot discount the fact that it is still vulnerable to selling pressure. Nevertheless, our observation lies on the late U.S. trading hours where gold is bought and not sold.

At Monday's Asian session, gold hovered at Friday’s high of $ 1582 before crumbling down to $ 1568 in the late European trading hours. The four- hourly chart shows support at $ 1566, $ 1561 and $ 1556 respectively. At the time of writing, a close above $ 1565 will bode well for gold bulls. Prices bounced higher after a test at $ 1568.

Tomorrow FOMC meeting minutes will shed more lights into Fed’s thinking and latest discussions. They will assess and recognize that the last quarter has been rather good for the economy. We are sure that Mr Bernanke will continue with the easy monetary policy and money printing programme, as he will repeatedly raise concern about maintaining the momentum of good economic data.

He may have to address possible asset bubble in the real estate and stock markets. He could downplay such worries as inflation remains subdued. Overall, we felt that the meeting minutes will maintain a dovish approach, and gold bulls could use that as a stepping stone to retake the 20 DMA at $ 1592.00.


Short gold at $ 1555 target $ 1525 with a stop loss at $ 1561
Long gold at $ 1555.50 target $ 1580 with a stop loss at $ 1545.50
Long gold at $ 1576.00 target $ 1603 with a stop loss at $ 1555.00 (in progress)
Resistance: $ 1564, $ 1571, $ 1579, $ 1594
Support: $ 1535, $ 1522 (2012 low)

Silver managed to keep most of its gain made from last Friday high of $ 27.43. It touched the upper Bollinger Band ® and currently consolidating between the high made and a low of $ 27.13. Once again, we are happy to admit wrong if silver can rally from here. We are still cautious on any rally, and remain bearish until silver managed to retake the $ 28.00 level.

Technically, the daily chart indicates a possible bullish reversal in the making. However, the MACD is still rolling in the negative zone and the stochastic fast line could still break lower. The lack of demand could easily escalate the selling pressure and undo the bullish technical indicator. Silver could repeat another bout of range trading and consolidation at this area, but once the support is given at its previous low, we fear a strong push to $ 26.00 is possible.

Long silver at $ 27.45 target $ 27.85 with a stop loss at $ 27.15
Short any silver rallies
Resistance: $ 27.35, $ 27.56, $ 29.50
Support: $ 26.64, $ 25.97