It’s a combination of carry trade and higher crude oil prices that is supporting higher gold and silver prices. The US dollar has been weakening on renewed talks of foreign currency diversification by central banks and narrowing down of interest rate differential between US and other nations. Hedge funds interest in gold, silver and copper seems to be rising with passing of each day. As investment in commodities rise, there will not be a sustained fall in gold and silver prices as many of us has been expecting. Technical correction affair in gold and silver prices will be limited for a day or two.
Gold June futures reached a high of $594.70 yesterday while silver May future reached a high of $1179.00 before settling at $592.50 and $1170.50 respectively. Copper may future reached a new high of $261.30 on strikes by workers in Mexico and expectations that demand from India will rise sharply. India is a net exporter of copper. Crude oil futures reached a high of $67.69 and looks set to test $71.00 a barrel. Higher crude oil prices will result in gold breaking $600.00 mark and silver $12.00 mark.
If Euro breaks and holds 1.2350 then it can test key resistance at 1.2530. The rise in euro will result in carry traders pushing gold over $600.00 to $620.00. Silver could easily test $12.60. The Iran issue is not out of the woods, it’s a sleeping giant. Anything can happen. The US March payroll number are expected to be near 1,90,000 and any numbers below the same will result in further bashing of the greenback.
MCX Gold June future reached a high of INR 8615.00 and is trading in a wider INR 8500 – INR 8650 range. MCX Silver May future reached a high of INR 17338 and is trading in INR 17050 – INR 17450. Gold and silver are expected to trade in the current range and only a break out of the same will set further direction. Trading volumes could reduce marginally because of Ram navmi celebrations. Volumes from rural India will reduce. There are more sellers of silver at higher levels than gold. A large numbers of gold traders went long at INR 8600.00 and above and have to square there position.
The momentum is certainly bullish. One can continue to adopt a buy on sharp dips, but should be flexible to take a reverse call if the bullish momentum shows signs of fizzling out.
GOLD
Gold targets $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 $1194, $1200 and $1258. The earlier resistance of $1158 is now initial the support with $1110.00 as the key short term support. There have been times when momentum defies the technical picture and silver continues to go higher. The same is happening now.
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