Gold and silver fell yesterday on scent of a compromise on the nuclear issue. Concerns that Iran may cut output if western powers impose sanctions eased amid hopes that the International Atomic Energy Agency would strike a nuclear deal with Iran after a diplomatic push from Russia and European Union states. Gold April future fell to a low of $549.60 and while silver May future remained firm but fell to a low of $997.00 before settling higher at $554.50 and $1010.70 respectively.
The US dollar gained on comments from Federal Reserve President Poole who argued that if economic data is consistently strong over the next few months, then the Fed may have to increase rates more aggressively. The economic numbers in the short term can manipulated as they are just statistics. In the long run the real picture will emerge. The Fed will have to keep on raising interest rates to run the US economy as it is just the interest rate differentials that is supporting the US dollar. Higher interest rate will burden the US consumer and they will become saddled with debt and the US savings rate will increase further in the negative zone. The net result gold, silver and other safe havens will rise. However there may be sharp corrections in the short run which will provide yet another opportunity to go long.
Crude oil prices fell on expectations the Organisation of Petroleum Exporting Countries would hold production at current levels at its meeting in Vienna today. These crude oil producing tiger nations have tasted blood of higher revenues due to higher crude oil prices and they will do every thing to prevent a sharp fall in crude oil prices. I do not even see crude oil future falling below $54.00 a barrel this summer while $80.00 a barrel prices looks like a reality in 2006. If crude oil prices rise, gold and silver will also rise as they are the best bet against crude oil induced inflation.
GOLD
Gold will trade in wider $550.00 - $570.00 range and needs to beak either of these levels for $543.00 and $580.00. There is an initial support at $546.40.
SILVER
Silver needs to break $1040 for further gains. On the lower side $995.00 is the initial support with $968.00 and $952.00 as the key short term support levels.
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