Silver March future reached a new high of $993.00 while April Gold futures reached a new high of $575.20 in asian trade ahead of the Fed meeting today. The situation in Iran is not showing any signs of cooling down. European diplomats yesterday dismissed an offer by Iran to slow down its controversial nuclear programme, as the Islamic republic continued its efforts to avoid being reported to the United Nations Security Council.
First will come sanctions on Iran and if the sanctions are ineffective to prevent Iran from building nuclearweapons then the war. It’s all upto Mr.Bush and his allies as they try to create a media hype that Iran will attack the world as soon as it builds nuclear weapons which may not be the case. This time around France and Germany are also with Mr.Bush as they missed pie in Iraq. The UN oil for food program was the biggest scam of all times involving politicians of every country. The Iran factor will exceed the UN oil for food programme scam. Gold and silver will continue to rally on uncertainties over middle east.
Crude oil is trading over $66.00 a barrel in the first month of 2006 and none of the global leaders are complaining about it. Crude oil is expected to rise above $80.00 a barrel in peak US summers on lack of refining capacity. The Fed will have tread carefully while raising interest rates to control crude oil induced inflation and housing sector is not affected in a big way. US personal saving rate is negative and only higher interest rates will continue to attract inflows into US economy so that it is able to generate the $2.00 billion its needs daily. History suggests most of the central banks have failed and raised interest rates too much to control inflation and if the past repeats itself there will a slow down in US economy and a US dollar sell off in 2006 despite Bernanke continuing to raise interest rates. Gold, silver and commodities will continue to rise on the back of falling treasury yields.
China announced over the weekend that the dollar makes up “much less” than 50 percent of China’s currency basket. They also said that they do not intend to accumulate more foreign exchange reserves. The surplus money will obviously be invested only in gold. Gold will continue to rise. This is just the beginning where one country is slowly shifting from US dollar to gold. In the coming years gold will be standard and the US dollar.
The medium to long term bullishness remains intact for gold and silver with $605.00 and $1050.00 as the immediate price targets. Pullback will provide yet another buying opportunity.
GOLD
Gold has been consolidating higher with $562.00 as the new support zone and is trading in $558.00 - $580.00 zone. A consolidated break of $579.00 for four hours will result in $600.00 and $625.00. Only a close below $555.00 for two consecutive days will result in further losses to $546.00 and $529.00 else the downside will remain limited to $555.00.
SILVER
Silver now targets $1000.00 and $1050.00 if it holds $952.00 on closing basis. It is consolidating at $970.00 at the moment and is nearing over brought territory and there may be a correction to $952.00 and $936.00 which will present yet another buying opportunity.
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