Gold June future crossed the $600.00 mark to a high of $603.10 while silver May future reached a high of $1219.50. Crude oil gained as declining gasoline stockpiles before the peak U.S. summer-driving season added to concern about reduced exports from Nigeria and Iran. Crude oil May future reached a high of $68.20 yesterday.
Crude oil futures are nearing $70.00 a barrel. We have the Easter vacations next week and people are going to take a mini vacation. In our view it is a deliberate attempt by crude oil producers and refiners to jerk up the prices and make a fast buck. When these companies need to re stock themselves up, crude oil prices will fall under $60.00 a barrel to $55 - $56. The impact of higher crude oil prices on global economy will not be known in 2006 we should see it in 2007 and 2008. India and other developing nations are not raising petrol prices. But sooner or later they have to raise prices or reduce taxes on petrol, which will result in medium term interest rates going further higher. If crude oil prices are at $68.00 in the first week of April, then we could see $80.00 and may be even $100 in 2006, if speculators and oil refining companies have their way. Even the recovery in the Japanese economy could be threatened by sustained higher crude oil prices.
It’s the expectations of a major US dollar depreciation in 2006 that is driving gold and silver higher. Commodities are the talk of the investment world. It’s a new kid on the block. But there is no physical demand globally of gold and silver. Indian gold demand will reduce from next weekend. There will be mild demand in the first week of May and in the last two weeks of June due to marriage season. Small and medium sized jewelers are idle. Fundamentally gold and silver look weak but the momentum is very bullish.
Gold, silver and other commodities are independent and not linked to the US dollar, treasuries etc. This is a secular unending bull run and has a lot a lot of steam left. 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.
MCX Gold June future reached a high of INR 8708.00 and is trading in a wider INR 8640 – INR 8800 range. MCX Silver May future reached a high of INR 17735 and is trading in INR 17350 – INR 18450 range. Gold and silver are expected to trade in the current range and only a break out of the same will set further direction. Traders in India now expect spot silver prices to reach a high of INR 19,000 to INR 20,000 over the next two to three months and will be buying if and when there is a major correction.
GOLD
Gold targets $611.20 and $618.80.The earlier resistance $595.40 is the initial support with $578.80 as the key short term support. Only a weekly close below $578.80 will result in $561.40 which is the key short term support now.
SILVER
Silver now targets $1258 and $1300. The earlier resistance of $1194 is now initial the support with $1158.00 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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