Gold and silver fell marginally in Asian trade after the Fed meeting raised interest rates by a quarter of a percentage to 4.50% yesterday. The Fed dropped the phrase “measured,” from the statement, they kept the rest of the sentence which said that “further policy firming may be needed.”They were also optimistic on growth, noting that “Although recent economic data have been uneven, the expansion in economic activity appears solid.” April Gold fell to a low of $570.50 while silver March fell to a low of $977.50 in Asian trade. April goldrose to a record high of $577.30 and silver March rose to a high of $995.00 yesterday before settling at $575.50 and $988.50.
The Fed was a bit hawkish in its statement but a rate hike in March remains a possibility. It will be now upto Mr.Bernanke to raise take the decision on interest rates. Unless crude oil prices cool down higher inflation is here to stay which will affect Bernanke’s decision.
Iran as said that they will not stop crude oil exports and said that there was no link between Iranian oil exports and questions over its nuclear programme. But the stalemate and war of words continues as Iran's President Mahmoud Ahmadinejad warned that if Iran is referred to the UN Security Council over its nuclear program, the government will be obliged to cease voluntary application of a key protocol to the nuclear non-proliferation treaty. Unless the geopolitical situation in the Middle East including hamas subsides gold and silver will find buyers at lower levels.
In Japan growth is starting to pick up as equity markets rise and real estate prices are also showing signs of recovery. There is a direct relationship between performance of the equity markets and performance of a country. In India the Bombay stock exchange (BSE) Sensex was at 2800 levels in April 2003 and before April 2006 it will be way over 10,000. Real estate prices are rising faster than stock markets in India and growth can be founds in every nook and corner of India. The same will happen to Japan but this will be a Japanese domestic consumption led growth and there will be less dependency on exports to US. The bank of Japan may continue with its zero interest rate policy but will stop pumping money into the Japanese economy which will affect global liquidity and commodity prices. Around thirty to fourty percent of the current commodity rally is due to investment demand. If there is a shrinkage in global liquidity commodity prices will see a sharp correction but not necessarily gold and silver.
President George W. Bush, seeking to revive his presidency, will say in his State of the Union address that the U.S. ``must continue'' to lead the global economy and break its ``addiction'' to oil. The US economy is in shreads under the leadership of Mr. Bush and gold and silver prices are going to trade with a bullish bias in the coming months.
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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