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Gold & Silver Full Report

By KHOBI

Contents:
Introduction Related News Various Sources Technical Analysis on Gold Technical Analysis on Silver Fibonacci Analysis (Trade Alerts) VaR-Value at Risk (Limits)

INTRODUCTION
Gold and Silver are two precious metals that are dictating the commodities and other markets as well. There is a strong positive correlation of 0.7998 between them recently observed, this suggests that a strong move in either market would move the other in same direction. We recently observed, how gold broke into $1600/oz range from 1530 to 1580 and heading back again to 1530 this week. Golds volatility has been around 1.4% which is seen as high in recent times. Similarly, Silver is back around 2670 range which was last tested in May this year. Volatility in Silver market is around 2.5% nearly doubled that of gold. Therefore it is more risky, but a volatile market is preferable for most Hedge Funds and Investors. I will be looking at price action on daily and hourly charts, giving you the support and resistance levels. Fibonacci retracements and extensions will used as a trading system, giving you clear entry points and exit points.

RELATED NEWS VARIOUS SOURCES

GOLD: Market players will keep an close eye on Europe events, as sell-off this week shows that the global economy is slowing down. According to Debbie at Kitco News the gold would hold around $1520/oz. The most active August Gold contract on Comex Division of the New York Mercentile Exchange rose on Friday 22nd June, settling at $1566.90/oz down about 4% on the week. The Kitco survey suggests out of 33 participants (participants included Investment banks, Futures Traders and Analysts suggests), 28 responded, 7 are neutral and only 12 see prices up. Oil prices are down so as gold, no more safe haven. This week main event to watch is the EU summit on 28th and 29th June focus will be on economic policies and foreign policies. The Fed announcement that they will continue its Operation Twist Program, selling of treasuries had not gone well with the investors. The next move up for the gold would be the fiscal cliff at year end.

SILVER: Silver will be near the lower range of $2600 which dates back to September. The July silver fell Friday 22nd June, settling at $2666/oz down 7.23% on the week. The China and US manufacturing data was disappointing last week which changed the market. Greek Elections are out of the way but Greece bailout is still on the list with troubled banking system of Spain. The Oil prices were on a downside taking gold and silver with it, worries about disinflation. Acording to Barclays analysts the silver demand is slowing down while

investment demand filling the gap. Slowing economic growth might pull down the silver prices.

TECHNICAL ANALYSIS ON GOLD

Gold Daily Chart Price Action:

On the daily chart you can see the horizontal lines that I have drawn which represent the support levels and the circles show when these levels have been been tested in the past. Support Levels: 1557.0, 1532.9, 1478.3 and 1441.4.

This is just the basic price action analysed historically, 1557.0 and 1532.9 support levels are waiting to be tested. A weekly technical outlook could be seen on www.oilngold.com, a very useful website.

TECHNICAL ANALYSIS ON SILVER Silver Daily Chart Price Action:

On a Daily Chart, same as for Silver, due to strong positive correlation between gold and silver the charts look identical. The horizontal lines are the support
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levels and the circles show how many times they have been tested in past. Could see the market rebound from any of the levels. Support Levels: 2601.7, 2493.8, 2396.6 and 2272.5. More technical analysis can be seen on www.kitco.com, another useful site.

FIBONACCI ANALYSIS (TRADE ALERTS)

Gold:

Gold 4Hour Chart Analysis time: 02:50am 25/06/12

Comment:
A Fibonacci Analysis on 4Hour Gold Chart. The green line is our Entry Level(Sell) at 1583.2, looking to go short here. But let the market retrace to this level first, use your favourite indicators once the market get close to this level. I normally use Bollinger Bands and RSI to make a decision. 70percent chance is that the the market will bounce from this level. Initially I will place my stops beyond the red line our Stop Level at 1597.8. Once the market finds resistance at our Entry Level and moves down below our Key Level 1577.6, I will bring my stops to the Key Level and see if the market is heading to our Projection Level at 1535.5.
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Remember: Wait for market to retrace, always use a 1hour or 15min chart to confirm the sell signal at the Entry Level using indicators. Observe the market to see what it does at these levels, there is always a chance of breakout if market conditions change and rally can develop in upward direction.

SILVER:

Silver 4Hour Chart Analysis time: 02:50am 25/06/12 Entry Level: 2767.6 and 2814.4 KeyLevels: 2734.9 and 2780.9 Stops: 2843.7 Projection: 2549.9 Same rules apply, for detail explanation look at the Gold Trade Alert.
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VaR-Value At Risk (Limits) VaR is used by mainly all Risk Managers, Hedge Fund Managers and by Traders as well. It uses mathematics and statistics techniques to determine how much you are likely to lose in give time horizon with specified confidence. There are many ways of computing VaR, Historical Approach the most famous in Industry, Variance-Covariance Approach commonly used by JPMorgan. I have used a basis Historical and Normal Distribution method to give you a estimate of VaR for Gold and Silver. Used Bloomberg for Data and calculated daily returns and then estimated VaR, I have pasted a VaR file from Excel shows calculation:
0.79988291 2.5385% 0.0008

Volatility (silver) Mean

Volatility (gold) Mean Bottom 5% VaR(%) Bottom 1% VaR(%) Historical Method: No of observations Bottom 5%

1.3940% 0.0007

Bottom 5% VaR(%) Bottom 1% VaR(%) Historical Method: No of observations Bottom 5%

-4.0921% -5.8221%

-2.2244% -3.1744%

1066 53.3

1066 53.3 9

Bottom 54rth return Bottom 53rd return Bottom 53.3rd return

0.03927813 0.04043338 -4.0087%

Bottom 54rth return Bottom 53rd return Bottom 53.3rd return

0.02237055 0.02254406 -2.2492%

Gold: VaR($) with 95%confidence T.VaR=VaR+ES Silver: VaR($) with 95%confidence T.VaR=VaR+ES

-35.145 94.1529

117.357 -406.2

The VaR with 95% Confidence means your most likely loss 95% of the time, for Gold its $36 which you would need additional to your capital for a single Gold Contract. Say if you Buy two Gold CFDs then you multiply $35.145 by 2. If you want to be more safe and also consider the 5% tail or worst losses then you take the Total VaR which is $94.1529. Same way for Silver.

Disclaimer: Commodity Futures and Options Trading has large potential rewards but
also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This website or blog is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website or blog. The past performance of any trading system or methodology is not necessarily indicative of future results.

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