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Gold Prices Revive, Gold & Silver Outlook

by on November 17, 2013 6:17 am GMT
 

Gold seen a pop in spot prices with the testimony (and its prerelease a day earlier) of the Federal Reserve chairwomen nominee Janet Yellen that indicated continued quantitative easing needs to nurse the ailing economy. Also, when asked by the Senate Banking Committee, Janet Yellen said asset bubbles were not evident to date or necessarily indicative of the Fed’s current policy. This gave gold a reason to perk up a little in the continuing downtrend.

Famed hedge fund manager John Paulson still holds firm on his gold bullishness in the wake of selling off half of his gold positions in the second quarter. Paulson’s gold fund was pushed around by the tumbling gold prices, losing almost 20 percent in September alone and 63 percent in 2013, according to documents obtained by Bloomberg News. George Soros, another well-know investor, purchased a large stake in the Market Vectors Gold Miners ETF. Miners has historically not followed the performance of gold as they declined even during precious metal’s “golden” days. However, some feel that due to the miners divergence that they could be set for a reversion.

However, when the long-term few of gold is put in perspective, the metal is still up over the last 13 years. And this year’s downturn created cracks, albeit psychological, in gold’s luster. Investors are finding it hard to store capital in gold over the longer-term, and the old safe-haven has become a trading vehicle on news and economic risk events.

“The big sell off we saw earlier this year drove several investors away, and now some players are picking and choosing how they would like to invest in gold,” said Peter Jankovskis, co-CIO of Lisle.

Gold received a bounce and found support near $1,280 per ounce but held a tight intraday range, finding resistance just under $1,300 per ounce. Intraday resistance is just above $1,300 with the 50 EMA and 38.2 Fibonacci level potentially keeping gold at bay until Wednesday’s data and FOMC releases.

4H Chart of GC

4H Chart of GC

The daily chart shows confirmed support $1,265. Dynamic resistance will be provided by the 20 EMA at $1,304 per ounce and the 50 EMA roughly $10 higher. It will be interesting to see whether the notion of Yellen’s confirmation of continued stimulus of $85 billion per month is already priced into the move. Although, a sharp data-related spike is likely. And depending on the price action and close after the reports should give a clearer picture if gold’s short-term momentum will continue higher.

1D Chart of GC

1D Chart of GC

Silver lagged behind gold most of the week. The high demand of the US Mint’s silver American Eagle sale of 40.2 million ounces did not help move price action into positive territory. Intraday, silver was capped under the 20 EMA and closed in the red. Silver, also, remains in large downturn.

4H Chart of SI

4H Chart of SI

The daily chart shows the large sideways channel with price action failing to rise above the former supportive trend line. Price action also broke lower from a large symmetrical triangle and has remained rather stagnated. Furthermore, there is a bearish 20/50 EMA crossover, and the -DMI is overwhelming higher than the +DMI. The ADX starting to slope up, potentially indicating a increase in momentum to the downside.

There could be a silver/gold divergence in price as silver looks to have the least potential.

1D Chart of SI

1D Chart of SI