Precious Metals At A Crossroads

It has been an interesting week in terms of the US dollar index, global equities as well as the ongoing Grexit issues. We have a complete full list of politicians and central bankers at each other’s throat, first with the dollar too strong (Obama), followed by the oversold yen (Kuroda & Amari) and then a weaker euro is much needed (Merkel).

With the lack of US economic data and on and off talks about a deal has left traders burnout. First the dollar rally fizzled and posted a bearish weekly candlestick that seems to indicate a cautious mood that Greece will be save thus dollar long is not in play anymore. Once the news that Greece is save, a higher Euro is widely expected.

Second, global equities also enjoy the roller coaster ride as any news from Greece is used a catalyst to dump and pump the price action at will. We have another week to the 18th June deadline and talks are starting to heat up. We do not think that there is any more can to kick down the road and the herd mentality seems to point to “Greece is saved” mentality.

Going into next week with so much at stake, we continue to argue that the dollar rally may roll over as September rate hike has long been priced in. If there is no rate hike in 2015, we envisage a dollar crash which is unlikely. The Federal Reserve has kept the market at bay far longer than it needed and it has enough economic data to support a rate hike. The soft landing approach works and now they have to deliver. Failure is not an option here.

Gold Technical Outlook

Gold weekly chart indicate a weak Inside day pattern (open to either a Reversal or Continuation pattern). This also indicates that price action could consolidate between 1205 to 1160 range and only a break of either direction will trigger a bigger move.

1st scenario

Break and close below 1160 then AB = CD pattern could play out to target 1130 levels again for a possible Double Bottom.

2nd scenario

Break and close above 1205 then short term bottom at 1160 and a retest of 1225 and 1232 is open again. Note that RSI continue to show bullish divergence on the weekly chart.

Silver Technical Outlook

Weekly Chart

With the weekly Bollinger band converging, we cannot ignore that silver could potentially start to carve out a bottom. A rally in the white metal has often been the catalyst and confirmation for the rest of the other siblings to go higher. Given its current state, we cannot ignore that silver could retest 15.60 levels and even lower at 15.45. We will not rule out that Silver can continue this weakness despite a bullish diverging RSI indicator (see chart). Take note that price action remains stuck within the range that is drawn within the orange channel line. We remain bearish as the long term trend continues to point to lower prices. Unless price broke and close above 18.00 then lower prices are expected.

Platinum Technical Outlook

Weekly Chart

Weekly Platinum has created an inside day and a grave stone doji. This could indicate 2 scenarios that we will discuss below.

1st scenario

Is the metal ready to reverse higher and undergo a corrective rally? One could argue that this is a weak inside day since price has not cross below the Bollinger band.

2nd scenario

This inside day is a continuation pattern of the prevailing trend. We are biased to scenario number 2 since the other metals such as Silver have yet to find a bottom.

Therefore, our outlook is that Platinum will retest 1087.50 and could very well break below previous low of 1086.50 and head lower to 1065 and 1030 levels before mounting any serious reversal.

Palladium Technical Outlook

Weekly Chart

Although it has yet hit the target of 722, Palladium continue to the downside as per our analysis. We are looking for one last flush to the downside to retest the red rising trend line and possibly 200 WMA at 722 levels for support. A retest for support and a reversal doji will allow palladium to stage a corrective rally to test for the 20 WMA and 100 WMA.

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