Sluggish Demand For Gold And Silver

Gold bears seem relentless on pushing prices lower. In the last 2 days, we witnessed strong buying interest from the low of $ 1589 and $ 1591 area (20 DMA). The strength in gold prices soon waned however, and selling pressure took over as soon as the gold price hit above $ 1600.00 psychological level. As we approach the end of Q1 and a long weekend, traders look to lock their profit and square off open positions. We expect a risk-off trading sentiment and volatile price swing in a thin market.

The worse than expected U.S. economic data did not help gold to move higher. Instead, there was a sudden sell off at 1300 GMT which drags gold to a low of $ 1595.50. Technically, gold continues to battle above the 20 DMA, and remains vulnerable to further selling pressure. The Fibonacci retracement support from the low in March to the high, showing support at $ 1595, $ 1589 and $ 1582. A break below $ 1589 may well drag gold to retest its previous $ 1575 area.


Long gold at $ 1620.00 target $ 1630 with a stop loss at $ 1611.50.
Long gold at $ 1592.50 target $ 1618 with a stop loss at $ 1575.00 – In Progress
Resistance: $ 1615, $ 1625, $ 1634 (50 DMA), $ 1650, $ 1686, $ 1697 (previous high)
Support: $ 1592, $ 1584.86, $ 1580.39, $ 1522 (2012 low)

Once again silver proved to be a problem child, as we witnessed another bout of selling. During the Asian trading times, silver was bid up and prices managed to maintain above $ 28.70 area but as we enter the US market, the selling begins again. Silver was unable to hold on to the gain made yesterday, which was extremely disappointing.

We will not get carried away due to a dominant US dollar which continues to cap any rallies. We have often noted caution forany silver trade. Unless silver can trade above $ 29.50, we will remain bearish. We also feel that is too much volatility (and non-volatility) to take a position.

We felt that silver is set to break lower, and may soon retest support at the previous low of $ 27.93. The daily chart shows the stochastic fast line bearing lower while the MACD remains stuck in the negative zone.

Long silver at $ 29.40 target $ 29.80 with a stop loss at $ 29.15
Short Silver at $ 28.15 target $ 27.90 with a stop loss at $ 28.25 – Profit
Resistance: $ 29.50, $ 29.74 (38.2%), $ 30.19 (50%)
Support: $ 28.00, $ 27.93, $ 27.50