-- Posted Tuesday, 16 May 2006 | Digg This Article

GOLD	SILVER
COMEX GOLD JUNE FUTURE -- $686.10	COMEX SILVER JULY FUTURE -- $1327.00
EXPECTED TRADING RANGE
GOLD -- $655.40 -- $730.30	SILVER -- $1172.0 - $1550.50
COPPER AND CRUDE OIL -- EXPECTED TRADING RANGE
COPPER JULY -- $338.00 - $498.40	NYMEX CRUDE OIL JUNE  - $70.80 - $76.20
MULTI COMMODITY EXCHANGE OF INDIA (MCX)
GOLD JUNE FUTURE/10 GRAMS	SILVER JULY FUTURE/KG
Rs.9,900 - Rs.10,700	Rs.19,200 - Rs.22,800
COPPER JULY FUTURE	CRUDE OIL MAY FUTURE
Rs.338.90 - Rs.400.80	Rs.3,140 - Rs.3,410
GENERAL MARKET CONDITIONS
The blood bath, slide in gold, silver and commodities in general was experienced for the first day 2006. There is a lot of hue and noises everywhere over the fall in precious metals as well as base metals. Gold and silver had beaten even the most of the optimistic targets and 2006 year end targets for gold, silver and copper was reached in April and May. If you throw a ball in the air the fall will be double the pace of the rise due to force of gravity, which is what happened to gold, silver and other precious metals and base metals. Gold June futures fell to a low of $677.50 while silver July futures fell to a low of $1305. Crude oil June futures also fell to a low of $68.51 a barrel while the US dollar has gained.   The slide in gold and silver prices is all about global interest rates. We have been mentioning all through out 2006, higher inflation due to that higher crude oil prices and commodity prices has forced most of the global central bankers to raise interest rates. Higher interest rates will result in higher treasury yields. Higher interest rates will also reduce excess global liquidity which will be felt in the long term. The rise in treasury yields has resulted in higher investments in treasuries. This will slow down the current rise in gold, silver and commodity prices to acceptable levels. The current pace of rise in gold, silver and copper is unacceptable was they all were rising a few percentage points everyday, week on week without a fall. I would term the current fall and further falls (if any) as “retracement” as it does not alter the medium to long term bullishness in gold, silver and copper. One needs to be patient and brave enough to re enter on any three percent slide in gold, silver and copper using a knock out options to reduce risk.   10 year US treasury yields are expected to rise to 5.60% to $5.75% over the coming weeks. However despite the fall in treasury prices, global equity markets may correct further and then rise. The global growth story has not changed and growth is here to stay. The factors supporting gold and silver are that of geopolitical risk, inflation, central bank diversification of foreign exchange reserves will linger in the mindset of long term investors and they will be buying on every major dip. Another reason why the retail investor in commodities need not panic and should stay invested. This week will provide an excellent opportunity for newcomer and late comers to enter at justified levels.   The technical correction is over but the momentum correction could still be there, as short term hot money may get out from gold and silver to other assets. Sharp pullbacks should be used an opportunity to go long. Volatility will increase even further this week due to the U.S CPI, PPI number.
GOLD
Gold needs to hold $673.40 to prevent further losses to $655.90. As long as $655.90 holds on closing basis the downside risk remains limited. On the higher side $696 is the initial resistance with $700.20 and $730 as the key resistance levels. A daily close below $655.90 will result in $622.70 as the next target.
SILVER
Silver has a technical congestion between $1260 and $1276 and as long as they hold on closing basis there is every possibility of $1550 - $1600. The medium term key support for silver stands at $1062. Resistances for silver are at $1392, $1425 and $1520.
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-- Posted Tuesday, 16 May 2006 | Digg This Article

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