The recent Cyprus debt was not scary enough compared with other debt volume.
It is pretty resolvable so long as European Central Bank (ECB) is willing to give a lending hand.
However, what triggered fear in the market was Cyprus started to sell national gold reserves on April 12 and began to roll out new panic sentiments.
Obviously, ECB and International Monetary Fund (IMF) did not give Cyprus full support for a bailout despite stating that they were prepared to go full throttle to stop the crisis from spreading.
After news reported Cyprus sold 40 tonnes of gold bullion the market declined from US$1,570 per ounce down to US$1,470 per ounce levels.
Unfortunately, the third week in April did not spare the market a breather for recovery.
China triggered another meltdown in global commodity prices.
On April 15, China reported its growth by Gross Domestic Product (GDP) at 7.7 per cent gain in 1Q from a year ago.
Honestly, any country would love to see this figure.
However, China is a large economy now and ranked as world’s second largest behind US economy.
Thus, having a growth of 7.7 per cent is not an inviting figure.
In fact, the 1Q figure was the fourth continual quarter that grew under eight per cent and analysts interpreted it as a slowdown.
At least, we know that China is taking eight per cent economic growth as standard benchmark now.
For a streak of gain beneath this level, manufacturing is projected to slow down and consumer demands also contracted in general spending.
After the China report was out, gold prices plunged from US$1,490 per ounce regions to US$1,321 per ounce areas before bargain hunting emerged.
Long traders and disbelievers were ousted from markets with losses if anyone tried to catch bottoms in such plummeting doldrums.
Moving into early May, we foresee the market will not recover so fast to US$1,450 levels though this level might be touched and slide again.
Too many long traders are hoping the trend to climb back above here to help recover their losses while we reckon the hope in market to reverse floating losses will either take long time or will never come.
In May, the market trend will more likely consolidate from top areas US$1,425 to US$1,450 and down to US$1,350 again.
Catching short entry from topside is more ideal to create profits.
However, beware of negative news as this could drive the yellow metal down a bit further.
Our technical target actually sits at US$1,290 levels though it was not accomplished.
Following gold, we have silver that follows the trend.
This secondary metal market has dropped from US$28 per ounce tops to US$22 per ounce bottoms in the same time period stated above.
But somehow, we reckon the silver has larger room for technical recovery in near future as the market has not really consolidated though gold climbed from US$1,321 to US$1,425 regions.
Silver only recovered from recent US$22 bottoms to US$23.80 regions.
From the technical outlook, we expect the trend to reach around US$25.40 levels before falling again.
In summary, we foresee silver range to trade from US$22 to US$25.40 in early May.
Just like the gold market, we advise traders to observe fundamental news in case additional negativity from European debt crises will bludgeon the commodity demands again.
For gold, stay tuned and check if the re-visit to downside will realise our forecast.
Good luck.
Dar Wong is the Principal Consultant and Master Coach in APSRI. The expressions are solely his own.
He can be reached at [email protected].