Technical Forecasts

The U.S. Comex gold futures fell 1.76 percent on Wednesday and rebounded 1.48 percent on Thursday to end at $1,467.60, a decline of 12.4 percent year-to-date. The Dollar Index surged 0.91 percent on Thursday to 82.224 after falling 1.23 percent in the beginning of the week. The Euro/Dollar dropped 0.87 percent on Thursday after the ECB cut rates. The S&P 500 index ended up unchanged in the past two days while the Euro Stoxx 50 index rose 0.25 percent.

Chinese Housewives Taking On Wall Street Short-Sellers?
According to a local Hong Kong newspaper, the largest fall in gold prices in 30 years prompted the Mainland Chinese tourists to buy about 60 tonnes of gold in Hong Kong during the three-day Labour Day holiday. After this surge of buying, physical demand will inevitably slow down although it is clear that gold is highly regarded as precious gifts for the younger generations and a store of value in Asia, providing support to gold prices and prompting the short-sellers to cover. On the other hand, the CFTC reported that speculators have reduced their net-long gold positions by 25 percent in the latest reporting week while they maintained the second-largest short positions in gold since the beginning of the data in 2006.

Central Bank Actions - Different Gold Reactions

The U.S. Fed recently maintained the pace of bond purchases at $85 billion per month. However, the Fed would be ready to increase or decrease the pace of bond purchases depending on the economic data, changing the market expectation that the Fed can only reduce its pace of bond purchases going forward. The slowdown in the March payroll data, a weaker inflation, the tightening of fiscal policy as well as a lower U.S. ISM manufacturing data have prompted the policy maker to remain flexible in its monetary policy. The gold futures nevertheless fell 1.76 percent on Wednesday as the market still expects the U.S. to grow faster in the next four quarters, leading investors to buy more equities than gold. The gold-backed ETP holdings fell again by 0.9 percent this week as of Wednesday and dropped 369.3 tons this year. On Thursday, gold demand and prices increased after the ECB cut the refinancing rate by 25bp and raised the possibilities of a negative deposit rate for the banks and further stimulus down the road.

What to Watch

The market will zero in on this Friday’s April non-farm payroll data and the unemployment rate in the U.S. Next week, we will watch for the Chinese April trade numbers and Germany’s March industrial production data on 7 May, the Bank of England’s monetary policy announcement and the Chinese April inflation number on 9 May as well as the Fed’s speech on 10 May.

Bullion Round Up

Asian market reopens with a poor Chinese HSBC manufacturing PMI and the data fuelled economist fear that a slowdown in the second largest economy is to be expected. Stock markets and the Aussie dollar did not take such data kindly, traded lower as investors are worried on a global slowdown – spanning from the US and the fragile Eurozone. Meanwhile, Eurozone manufacturing PMI for April came in slightly better than expected but still showing contraction.
Christian Lagarde of IMF has already warned the ECB to act and change their austerity stance to a pro-growth fiscal and monetary policy. The north south divide among the EU countries can be clearly seen on the economic numbers, growing concern of disinflation as well as a high level of youth unemployment added pressure on ECB president Mario Draghi to cut interest rate. He did just that and delivers a 0.25% cut on the interest rate.
FOMC meeting statement is reflected as neutral to gold positive. Gold was initially sold off but held at support $ 1440 and then retraced higher. Half of the market continue to see additional stimulus as a major plus for a higher gold prices but certain group are worried that the Fed are laying the foundation to cut back on the monthly $85 bln QE programme depending on the economic data. The statement reflects heavily on the change in unemployment figure which play a big part in the Fed’s on-going decision. Gold tracked other markets lower on renewed worries over the Chinese, US and Eurozone economies.
In other news, investment banks continue to pour cold water on gold early recovery. Michael Haigh of Societe General shared his view that gold has “come to the end of its era as ETF flows and Hedge fund flows have gold changing in direction for the first time in a long, long time.” Goldman Sach continue to see gold prices heading lower even after they close their short position – arguing that it will take time for gold investors to recover from the sharp selloff. One of the biggest factors remains to be the outflow in ETF funds which has not abated despite strong physical demand for gold bars and coins. Legendary investor – Jim Rogers prefer to stay on the side line at the moment and will only buy if gold revisit $ 1300 level again.

Gold Technical

Trading ended with gold heading a lot higher after it found support at Wednesday low of $ 1440. The ECB cut interest rate as expected gave gold prices a boost higher as it was initially trending between $ 1450 and $ 1455 area in the early European trading session. A better than expected US Jobless claim initially slowed the rally but soon prices moved higher to retest the upper trend line (see below 1 hour chart). At the moment, the upper trend line is the resistance at $ 1474 and the next big resistance stands at $ 1485. A break pass $ 1485 will allow gold to retest $ 1500 and $ 1515 area.
We picked out an interesting quote from Kristian Kerr, Senior Currency Strategist of DailyFX.com who shared our view – “If the 1320 area is going to undergo some sort of re-test we would expect it to start from somewhere around 1500. On the other hand, if the metal just blows through 1500 then the importance of last month’s low will increase significantly.”
We would like to repeat our advice from our previous commentary that the gold market could see possible slowdown in physical demand which may weaken gold rebound. In addition, continuous outflow of funds from ETF only increase selling pressure. Investors who are still holding will be wary of a possible margin call again.
One of the biggest worry is that gold could start to break lower and short sellers continue to add pressure. A break below $ 1456 (50% retracement) could easily take gold to a low of $ 1404. However, a break pass $ 1404 will give the bears more control and prices could fall to revisit $ 1325 again.

Resistance: $ 1487, $ 1496, $ 1525 Support: $ 1440, $ 1425, $ 1404, $ 1325.



Silver Technical

A rebound in gold took silver higher as it also found support at $ 23.26 (see chart in Gold & Silver – Warning Signs Ahead!). Technically, the RSI was oversold while the stochastic fast line hit rock bottom. Post FOMC data has helped spur silver prices higher despite the gloomy economic data. ECB rate cut helped the prices to soar higher with the RSI treading higher which indicate strong buying interest. The MACD has also crossed into the positive territory on the hourly chart and the current trend continues for now.
However, we must continue to warn that the rebound could be on its last leg and a break below the lower trend line (Daily Chart) could spell more downside pressure on the white metal. The market remains bearish and this rebound could prove short lived as the speculators are positioning for more price weakness in the next few weeks.

Resistance: $ 24.82, $ 24.91, $ 25.59 Support: $ 23.26, $ 22.88, $ 19.00.

The pair is trading along an uptrend.
The uptrend may be expected to continue while pair is trading above support level 1476, which will be followed by reaching resistance level 1500.An downtrend will start as soon, as the pair drops below support level 1476, which will be followed by moving down to support level 1457 and then 1433.
Supports: 1476, 1457, 1433
Resistances: 1500

Bullion Round Up

Better than expected ADP nonfarm payroll data sent gold and silver lower to retest support at $ 1456 (50% retracement area) and silver at $ 23.41. The initial reaction was a selloff but strong demand came in to push prices back up, indicating that traders are taking time to digest the job data and overall sentiment is that the Fed will remain accommodative. ISM non-manufacturing index came in weaker which added a twist on how well the US economy is recovering. The Fed could face more mixed data as certain economic indicators showing positive numbers while the other core numbers lagging behind. UBS Joni Teves simply put into context “While there has been some scaling-back in recent Fed commentary, this has not been deemed sufficient as yet to warrant a sharp rally to unwind the fears of an earlier end to QE that have been seeping in since the beginning of the year.”
We must stress once again that gold and silver is in a corrective bull market after the massive selloff.
Investors and analysts might argue otherwise – opting to say that this is the beginning of a bear market for years to come. Call us naïve, but we are well aware that after this rebound ended (somewhere around $ 1500 to $ 1522 area) – prices could retest previous low at $ 1327 or even lower as some estimate at $ 1300, $ 1250 or $ 1100 even! We do not have any crystal ball to project how low prices could go to but a revisit to $ 1325 looks highly possible.
After the second corrective down phase, we see a slow recovery on prices given that the global economy environment continues with accommodative stance and policy. Structural reforms among the Eurozone countries continue to be an obstacle for EU politicians. There is no quick fix solution on high youth unemployment, possible disinflation as well as an economy that show contraction. ECB will maintain low interest rate and remain open minded to unconventional fiscal and monetary tools if necessary. Meanwhile, Fed recent statement also offers such flexibility of increasing or decreasing the monthly QE programme. All of this is done in light of the changes in economic environment. Economists felt that both central bankers are giving off a negative vibe that the worse is yet to come.

Gold Technical

Gold buying may slow if prices rally to $1,500, and a “significant number of funds” may place bearish bets above that level, Credit Suisse Group AG said in a report yesterday – quotes from Bloomberg. Last Friday, we saw that gold attempted to push higher but failed to break resistance at $ 1488. In addition, the better than expected ADP job numbers sent fear among the gold community that Fed might reduce the $ 85 bln QE programme. Soon, the market settles with a rebound and the stock market could only care less but posted an all-time high on the Dow – breaking past the 15,000 barrier and the S & P 500 breaching 1,600.
We would like to repeat our advice from our previous commentary that the gold market could see possible slowdown in physical demand which may weaken gold rebound. In addition, continuous outflow of funds from ETF only increase selling pressure. Investors who are still holding will be wary of a possible margin call again. “The fundamental picture, for now, has changed,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen. “The investment community or those trading paper gold in futures and ETPs are still heading for the exit.”
One of the biggest worry is that gold could start to break lower and short sellers continue to add pressure. A break below $ 1456 (50% retracement) could easily take gold to a low of $ 1404. However, a break pass $ 1404 will give the bears more control and prices could fall to revisit $ 1325 again.

Resistance: $ 1488, $ 1496, $ 1525 Support: $ 1456, $ 1440, $ 1425, $ 1404, $ 1325.



Silver Technical

Prices whipsawed after the release on the better than expected ADP job numbers. Silver tested the 38.2% retracement area of $ 24.32 but failed to gain above that level. Instead, it fell to retest the lower trend line (see below chart) and rebounded strongly. This indicates that the uptrend rebound is still in progress and wild swings are to be expected. The swings in US dollar index only add more volatility in the precious metal complex.
However, we must continue to warn that the rebound could be on its last leg and a break below the lower trend line (Daily Chart) could spell more downside pressure on the white metal. The market remains bearish and this rebound could prove short lived as the speculators are positioning for more price weakness in the next few weeks.

Resistance: $ 24.82, $ 24.91, $ 25.59 Support: $ 23.26, $ 22.88, $ 19.00.



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INTRADAY CHART



7th May:Unless I'm mistaken the move down from the 24.83 high doesn't look consistent with the start of a 5-wave decline. Thus, be aware of a possible extension higher to the 26%-38.2% retracement area between 24.83-26.02. From there we should see losses.
Only an earlier break below the 23.24 low would risk direct losses that need to develop in 5-waves in Wave (a) of Wave (v). I suspect this will move below the Wave (iii) low at 22.04.
When this does break down the first stop should be the span of the Wave b - which being a triangle could be between the 22.85- 23.50 area.

RATIO TABLE



Good trading
Ian Copsey

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Our analysis on cable suggests that a diamond pattern is currently in play.*
A break out from the diamond either to the upside or downside will present a good short term trade.*
When we see a confirmation of a close outside of the diamond we will be entering a position and looking to take 100 pips from the market.*
We are also keeping an eye on Euro/£ which will give some good indications as to how far the trades can run, we are leaning towards a lower Euro/£ which will give cable the push it needs to reach the 1.5700 level that we are looking for. Once cable reaches this level Platinum will be looking to start building short positions as it is our view that cable is looking toppy around these levels and a correction and downside turn could yield a good 500 pips.


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We are currently eying up AUDNZD for a key reversal long.The cross-pair AUDNZD is currently sat at a promising buy level @1.2000 ( a level price has not breached in almost 4 and a half years!) and its current status as a bullish pin-bar reversal looks encouraging providing it closes like so tonight.
Not only do we have a strong level at a psychological number, the pin bar also over-laps with a 1.272 Fibonacci extension (taken from the swing low of February 2013 to the swing high of March this year) in addition to trend line support.
Furthermore, we have divergence on the RSI to indicate to us that the sellers’ strength is being sapped and is no longer as strong asin previous weeks.





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After rising for two consecutive weeks, the U.S. Comex gold futures fell 1 percent week-to-Tuesday to $1,448.80 although prices touched $1,458 on Wednesday Asian morning. The story of the week is still rising equities, with the S&P 500 index climbing 0.71 percent after rising 2.03 percent last week and the Euro Stoxx 50 index rising 0.2 percent after surging 2.99 percent last week. So far in May, the S&P 500 index, the Euro Stoxx 50 index and the MSCI World index have jumped 1.78 percent, 2.10 percent and 1.08 percent respectively. The gold futures have slipped 1.58 percent this month while the Dollar Index has risen 0.62 percent.
Better Data from the U.S., Europe and China

Last Friday, the U.S. reported a higher-than-expected rise in nonfarm payrolls of 165,000 in April. The unemployment rate also inched down 0.1 percent to 7.5 percent in April. In Europe, the ECB governor stands ready to cut interest rates again, paying close attention to all the economic data in the next few weeks. The ECB predicts the EU-17 economies will shrink 0.4 percent in 2013. However, Germany’s March factory orders surprisingly jumped 2.2 percent against a predicted drop of 0.5 percent, indicating a recovery is taking place. China reported a larger than expected jump in exports of 14.7 percent in April although several economists already pointed out that some capital flows may have been disguised as trade flows leading to the inflated exports numbers. Nevertheless, imports rose 16.8% year-on-year, reflecting a pretty robust domestic demand picture. In fact, Hong Kong has just reported that China’s gold imports from Hong Kong reached a record high of 223.52 metric tons in March before the large sell-off in gold in April. The China Gold Association stated that China is currently short of gold jewellery inventory after gold purchases surged in April.

Fund Holdings
Bloomberg reported that for the week ending 30 April, speculators in gold increased their net-long positions in options and futures by 19 percent while they decreased their net-short positions by 9.2 percent. However, the net-short positions are still more than three times the average since the data started in 2006. The gold-backed ETP holdings dropped further on Monday to 2,254.68 metric tons, after a record fall in April and a peak in December 2012. Given the reduction of tail-risk in Europe, the rising labour market in the U.S. and the low inflation rate, investors prefer equities to gold in the near-term. Nevertheless, as the World Gold Council pointed out, gold still has a place in investors’ portfolios as a hedge against the consequences of the on-going global quantitative easing.


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Bullion Round Up

Global easing continues as central bankers around the world are busy cutting interest rate and laying out policies to make the changes permanent. ECB Mr. Draghi even suggested that they are “open minded” about negative interest rate. The Euro tumbled lower after his speech after the initial 0.25% interest rate cut. The ECB was under a lot of pressure to cut interest rate simply because of mounting economic data that suggest a contracting Eurozone and the high unemployment that may increase social disorder. Yesterday, we witnessed Australia’s RBA cutting rates by 0.25% as well. “The reaction was rather sharp as only a sizable minority of analysts were looking for a cut at this meeting” quotes from tradingfloor.com.
The Obama administration is cancelling $4.9 billion of the $85 billion in automatic US spending cuts that took effect March 1, a move that restores some funds according to White House official via Bloomberg. The Federal Reserve maintains the $85 billion QE programme and could possibly look to increase or decrease it. Japan just embarked on a large scale QE programme to fight deflation. The current situation painted the urgency among central bankers to act now rather than being branded as too slow to react. They are like poker players, being forced to throw more money so that the others cannot call their bluff. At the same time, they are running out of ammunitions after committing a large bet on the table. Their short term approach is to throw more chips (more money printing) so as to keep the game running. Equities are rising on the back of more money printing, adding pressure as an alternative investment compared to precious metals.
Gold prices are currently supported by a strong physical demand that was ignited after the huge sell-off. “We expect the physical demand to support the market, but could prove difficult to maintain in the face of rallying equity markets, ETF outflows and speculative financial shorts” said ANZ in their monthly report. Despite the continuous global easing, disinflation seems to be the main agenda that needs to be address. On the contrary, Gold is usually bought as a hedge in times of rising inflation. After the massive sell-off, gold will need to time to recover and rebuild a stronger case before moving higher. Continuous ETF outflow are slowing down and weak hand investors have been flushed out of the market, thus creating more rooms for gold to recover. At the moment, gold will need time to regain that confidence back.

Gold Technical

Gold is currently trading in the range of $ 1440 to $ 1488; investors are pausing to digest the recent economic data and changes brought about by central bankers. Physical demand may start to slow down as prices have risen close to $ 1500 area and some investors will wait for another price drop before committing to more purchases. Meanwhile, MKS report their short term view “market chatter of large stop loss orders accumulating above $ 1500, the market has every reason to push higher over the coming days/weeks”. The short sellers will defend the $ 1525 level which will act as a strong resistance for further upside.
We would like to repeat our advice from our previous commentary that the gold market could see possible slowdown in physical demand which may weaken gold rebound. In addition, continuous outflow of funds from ETF only increase selling pressure. Investors who are still holding will be wary of a possible margin call again.
Resistance: $ 1488, $ 1496, $ 1525 Support: $ 1456, $ 1440, $ 1425, $ 1404, $ 1325



Silver Technical

Silver followed gold, breaking lower to retest a low of $ 23.45 area before rebounding higher. Previous low stands at $ 23.26 and should silver break below that then it look poised to further selling pressure. Daily chart shows that prices are trading lower after hitting the upper trend line at $ 24.83 which is the resistance now. The current price is still in the uptrend line but a break below could spell a retest to previous low made at $ 22.00 area.
We must continue to warn that the rebound could be on its last leg and a break below the lower trend line (Daily Chart) could spell more downside pressure on the white metal. The market remains bearish and this rebound could prove short lived as the speculators are positioning for more price weakness in the next few weeks.

Resistance: $ 24.82, $ 24.91, $ 25.59 Support: $ 23.26, $ 22.88, $ 19.00



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The pair is trading along an downtrend.
The downtrend (first zone) may be expected to continue while pair is trading below resistance level 1458, which will be followed by reaching support level 1442 and if it keeps on moving down below that level, we may expect the pair to reach support level 1425 (second zone).An uptrend (first zone) will start as soon, as the pair rises above resistance level 1458, which will be followed by moving up to resistance level 1470 and if it keeps on moving up above that level, we may expect the pair to reach resistance level 1490.
Supports: 14442, 1425
Resistances: 1458, 1470, 1490





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