Both gold and silver have broken some technical support levels today resulting in both falling to a three-week low. The pressure on both metals has risen over the past week on a combination of reduced safe-haven buying and the fast approaching US Federal Reserve meeting next Wednesday where a reduction in its massive asset purchase program is expected to be called.
Gold bull-run wavers
Gold has broken a three line support in a 1,348-1,353 USD/oz range which signals a renewed test of the bullish sentiment which has prevailed since a low was made on June 28. The next lines of support are now at 1,337 USD/oz and then 1,307 USD/oz, both retracement levels of the June to August rally (see chart below).
With the announcement of tapering now a foregone conclusion, the remaining uncertainties relate to the split between mortgage and government bond and the actual size of reduction. The market consensus currently focus on a USD 10-15 billion reduction and once the announcement is out of the way the market reaction could surprise as the potential of a "sell rumor - buy fact" could be seen. That is especially so, considering the major spike already witnessed in government bond yields. Once the uncertainty is out of the way we may see the bond market realign to the new reality and it could lead to a rally not least considering the recent weakness in employment and housing data.
Having broken below 1,350 USD/oz many stops have now been cleared leaving the market in a better position to react to market friendlier news. Technically and physiologically however a close above 1,355 USD/oz is needed to swing the sentiment back to positive.
Copper effect
Silver has reacted to the same news that drives gold with some added weakness coming from continued profit-taking in copper. The December contract of HG Copper (HGZ3) is currently testing the lower end of its 3.20-3.40 USD/pound range and a break below could trigger some additional underperformance of silver relative to gold.
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Gold, Silver Hit Three-Week Lows As Further Tests Lie In Wait
Published 09/12/2013, 07:22 AM
Updated 03/19/2019, 04:00 AM
Gold, Silver Hit Three-Week Lows As Further Tests Lie In Wait
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