Next Dollar Move The Catalyst For Precious Metals

Last week highlight was the not only the weakness we encountered on the US dollar index but also the bloodbath – some say flash crash of the equity market. That falling hot knife on the butter sliced easily passed through various support – not looking back to retrace for now. Some of us call that Friday madness while others see that as a golden opportunity to pick up cheap valuation before the bull return with a vengeance. That V shaped recovery has been the miracle worker over the last few months – but will we see it happen again?

There is no doubt that investors will be mulling over the weekend about where to find more yield? Europe looks promising and much more viable (post QE) but US economy is picking up well now (or so they say) – Asia remains under threat of hot money being siphoned back to the US (potentially a sapped at liquidity). The world economy has certainly not learnt its previous lesson but rather build the current recovery on the back of more debts.

It is an amazing “Debt Coalitions” that world leaders and central bankers have chosen in this cocktail. Quantitative easing has and will continue to be the heroine for drug addicts while zero or negative interest rate could soon be cocaine to some. Such exotic concoction of drugs served well but they will need more (possibly higher dosage) to keep the current economy afloat.

Oversupply of goods, overpopulation of the baby boomers and lack of serious policy changes are the theme in our economic and social crisis. We are merely stating the fact here but a balance solution is needed from the top. Growing wealth inequality is increasing to the extent that there trickle-down effect has not deliver any positive outcome.

Other than rumbling on the above, we advised cautious trading as volatility has certainly increased. Economic data should be taken with a pinch of salt while the dollar bulls could yet make a comeback.

Gold Technical Outlook

Weekly Chart

Weekly candlestick shows a hammer candlestick with a long tail – suggesting that bulls are not ready to give up the fight. Note that price ended at $ 1203 which is $ 2 below the 38.2% retracement of 2015 high. Bears will aim to break $ 1177 and target previous low but wary of the rising trend line (see monthly chart). Current setup seems to favour a test to higher level which has resistance at $ 1225 and $ 1245. Overall, Gold continue to thread in a bear market and any rallies are corrective move until various key levels are broken.

Monthly Chart – the all-important rising trend line that traders will look take note of - $ 1160.

Silver Technical Outlook

With US dollar weakness surfacing, Silver prices failed to rebound higher to reclaim previous high of $ 16.60 level and that does not bode well. However, prices are still lingering above the all-important support above $ 16.00. The selling has receded while any further action could depend on the next set of economic data and US dollar’s reaction. To neutralise the selling momentum, Silver needs to trade above $ 16.61 but we fear that upside remains limited. The potential for further selling may continue to dominate as the bears look to take out $ 16.08 and may well target $ 15.50 area or even the lower end of the weekly BB at $ 15.31.

Weekly chart – a rising RSI with prices potentially testing higher numbers

Platinum Technical Outlook

Buyers return to Platinum despite a low at 1137.50 – indicating short covering as the close price came in at 1165.94. Thus, recent price action formed a slightly bullish hammer candlestick.

A breakout above $ 1192 suggest more upside is in store and it will be a strong bullish indication away from the down trend line. Any trades will need confirmation of next week price action. Therefore, we will stay on the side line for now.

Weekly Chart – Notice the Trend Line. Will prices set to retest the upper trend line before breaking lower? Meanwhile, the rising RSI and stochastic providing some support for more upside?

Palladium Technical Outlook

Short order placed last week missed by 0.50 cents but Palladium has again posted a strong bullish candlestick, suggesting more upside in the short term. Resistance at $ 784.65 is in play and should price action hold above that then $ 808 and $ 824 is the next target. Any pullbacks are buying opportunity. Short term, we see Palladium pulling back at the open since we watched the 4 hourly price action that suggest a rise of 35 dollars followed by reversal of 30.

Weekly Chart – RSI holding on support – waiting for short term time frame for more confirmation.

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