Precious Metal Bludgeoned!

  • Gold and Platinum made 2015 new low
  • Palladium retesting 2011 low with a triple bottom potential
  • Silver managed to rebound unscathed but the room lower is there
  • VIX index lower with equity market remain elevated (risk on sentiment dominate)
  • Rumour of SNB intervention – Chinese Equity at risk of further downside
  • Strong USD could remain while Euro look set to make new low
  • December kicks off with various risk events from ECB, RBA and FOMC
  • Various Central bankers set to speak and set the tone for December and into 2016
  • NFP build up and counting down to a US rate hike
  • Geo-Political risks have subsided but any sign of escalation could throw in volatility to the market
  • Expect a nervy start as traders return while trading volume could recede

With Thanksgiving out of the way, the VIX indicator could resume lower – targeting previous low for support. If it fails to find support, we expect a retest of 2015 low at 11.56 and only a break above 17.25 will relieve the selling. A breakout higher cannot be rule out as the current price action may indicate a double bottom formation.

The above 3 charts help to highlight the oversold condition in gold and yet lower prices are expected. We will argue in more details below.

Dollar Technical Outlook

Dollar index is setting up for a bull flag breakout to the upside and a potential AB=CD formation at play. After October low, the bull has returned with a vengeance and these setups for a strong end to the dollar. This view remains viable as long as the ECB deliver on more QE – devaluing the Euro while the FOMC reaffirm their intention for a December rate hike. The only possibility that the dollar index derail from this are – ECB and the FOMC out with the opposite surprises (highly unlikely) or another Chinese yuan devaluation.

With the overextended price action, the most logical trade is to fade the current strength. As the dollar index breached above its upper Bollinger band, it is sensible that profit taking will take place and we witnessed that last week. Technically, we could see a deeper pullback if price broke below the key support (what was strong resistance) but if we get any risk off sentiment and stronger Euro, dollar weakness may continue. However, given that we are 2 weeks away from a potentially more QE from the ECB – dips remain to be a buying opportunity.”

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Daily

Gold Technical Outlook

As highlighted in last week report, we stressed how gold is set to make another new low. Post Thanksgivings, traders return and gold plummeted lower based on several reasons. First was China equity market sell off, technical weakness as previous low at 1063 does not offer much support, SNB rumour that send USD higher and a rather unlikely rumour that ECB may not add on their current QE programme. The risk reward has certainly changed as we envisage a likely bounce which could play out during December risk events (ECB/FOMC). We cannot rule out a retest lower but a bounce is certainly in store.

“Now it is all about timing for a potential new low on gold for 2015. This new low is going to an important level and could well coincide post ECB and FOMC meetings. Dollar bulls may not have a strong fundamental reason for holding dollar at such a high price then. An end of year short covering bounce in gold could well repeat if the fractal from 14 and 15 is to play out. The risk reward has shifted in favour of going long even when sellers remain in control. We envisaged a dump and pump scenario leaving a long wick into the year end.”

Position Valid Date Price Action Stop Loss Target Results
LONG   1050 Order Placed 1030 1100  

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Daily

 

Silver Technical Outlook

With gold making a new low, Silver managed to stay just above 13.89 – potentially suggesting that there are no new sellers to absorb the current price action. Overall sentiment remain bearish and the sellers are in control but we cannot rule out that this consolidation phase will remain range trading before we see any spark to the upside. As a guideline, we will only enter a short-term long if price managed to break and close above its 20 ma.

The triple bottom is still much alive but last week price action indicate a very weak bounce even after series of selling. However, it is clear that the extreme bearishness seems to suggest a potential bottoming phase and if seasonality is at play – silver could well have a large flush before a decent rebound. Taking a trade pre ECB and FOMC meeting only invite stop loss to be hit and the price action of the white metal is very much erratic to say the least. We will monitor for now.”

Position Valid Date Price Action Stop Loss Target Results
             

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Daily

Platinum Technical Outlook

As long the Chinese market continue to wobble with their economic growth, prospect for higher platinum prices is low. If there are production cuts, it could help reduce the selling pressure. Any marked improvement in the Automobile industry could also alleviate but technical picture suggest another test lower is in store. Given that the larger timeframe suggest an RSI divergence, we have placed an order to long platinum for a short term bounce with tight stop.

Very much oversold but sellers remain in control even though we expect a short lived bounce. It will take more than a technical improvement from the chart but also fundamental improvement. We earmarked that platinum has rooms to break lower but any more extreme selling may well see a big rebound in the short term.”

Position Valid Date Price Action Stop Loss Target Results
LONG   795 Order Placed 785 840  

Weekly

Daily

Palladium Technical Outlook

Price action missed touching our buy target by 1.7 and technically, a large divergence is in the making. We maintain our outlook as per last week – current price action seems to suggest that palladium could well have hit bottom. Scrolling out the chart back to 2011 there is support here and a potential triple bottom. Buyers flock in at 530 levels and as long as buying interest appear here then expect a return to the upper channel.

Position Valid Date Price Action Stop Loss Target Results
LONG   525 Order Placed 505 610  

Weekly

This article is written according to the author’s views and by no means indicates investment purpose.

 

 

 

 

 

 

 

 

 

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