Gold Steady, Silver Could Consolidate Further

Last week, we witnessed steady and higher gold prices, completing a second weekly gain. As Bloomberg reported, assets in gold backed ETF rose for the first time in five weeks. Spot gold is supported as global sentiment lean to more quantitative easing as well as a near-future easy monetary stance.

Economic data from the eurozone does not paint a very encouraging picture. Several euro countries could again face slow or no growth and high unemployment numbers. The EU summit felt that the euro crisis is contained for now, and attention should be diverted to growth improvement. The biggest discussion among euro leaders in the next few weeks could include “less austerity and pro-growth” policies. Data to watch this week: German Zew Economic Sentiment, February U.S. housing starts on March 19, US FOMC meeting on March 20, Flash manufacturing PMI for China, Euro and U.S. on March 21.

The daily chart signals a rather encouraging development, as the stochastic fast line crossed higher and the MACD pointing in the right direction. The RSI has picked up too over the last few weeks, indicating buying interest at the lower prices. As gold prices trade above the 20 DMA, it could soon mount an attempt to conquer $ 1600.00 and target $ 1620.00.

Long gold at $ 1592 (2 contracts) target $ 1598 and $ 1604 with a stop loss at $ 1587.50
Resistance: $ 1604, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high) Support: $ 1584.86, $ 1580.39, $ 1561.4, $1555, $ 1545, $ 1525, $ 1522 (2012 low)

Silver prices continue to attract bargain hunters to buy in the dip after last week's support retest. We remain neutral bearish on silver, given how volatile the trade can be. The past few weeks, we have witnessed several instances when prices rallied hard and returned all the gains made.

We are sticking to our previous analysis that silver could consolidate further; we will change our neutral stance should it cross above the $29.40 area. The daily chart shows the stochastic fast line trying to cross higher, and the MACD is still rolling in the negative zone. Currently, we are paying closer attention to the Bollinger band which is getting tighter, indicating an imminent breakout.

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
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%) Support: $ 28.55, $ 28.33, $ 27.93, $ 27.50