Gold June future reached a multi year high of $596.80 and while silver May futures also traded reached its historical highs. The US dollar has been weakening after the Fed meeting last meeting. Crude oil prices are nearing $70.00 a barrel mark.
It’s a combination of higher crude oil prices and geopolitical worries that is driving gold and silver prices higher. If crude oil prices in this hot weather are at $66.00 a barrel then it could easily break past the $80.00 mark in the peak summer demand. Higher crude oil prices imply higher interest rates and stronger gold and silver prices. The ghost of Iran also leads to greater investment demand. A permanent solution is yet to be reached between Iran and the world and any thing could happen. The US manufacturing sector is expanding but the pace has been disappointing and along with the slowdown in the housing market the greenback is getting weaker. The investors in US are themselves not interested in US equities which is a better reflection of the things to come.Higher investment demand from US in gold and silver suggest further gains in the short term and a long term depreciation of the US dollar.
The carry trade is also continuing which is also supporting the current momentum in gold and silver prices. Bank of Japan will raise interest rates only when there is no other option. Higher crude oil price and any signs of a slowdown in US consumer demand pose a risk to growth in Japan as well as Eurozone. These factors are again gold and silver bullish.
There are a large number of market moving economic news which will add volatility to the markets this week.The momentum is certainly bullish, but there will be profit taking and position re building as this is the beginning of a new quarter.
GOLD
Gold targets $598.00 - $600.00 for $611.20 and $618.80.The earlier resistance $578.10 is the initial resistance with $567.90 as the key short term support. Only a weekly close below $567.90 will result in $561.40 which is the key short term support now.
SILVER
Silver now targets $1200.00. A consolidate break of $1200.0 will result in $1258. There have been times when momentum defies the technical picture and silver continues to go higher. The same is happening now. On the lower side $1110 is the key support. Only a close below $1094.00 will result in further losses, else the downside is limited.
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