It’s about momentum and the US dollar for gold and silver. Gold, silver and copper pared their Monday’s losses as gold June future rose to high of $675 and silver July futures rose to a high of $1319.50. Copper was the biggest gainer as July futures rose to a high of $389.50. The US dollar is range bound on lack of major market moving economic news while crude oil futures are above $70.00 a barrel.
Gold, silver and copper rose after the Organisation for Economic Co-operation and Development said that he world’s leading economies remain strong. The optimistic assessment helped the equity as well as commodity markets. The organisation substantially upgraded its growth forecast for Japan to 2.8 per cent this year from 2 per cent and also raised its projection for next year by 2 percentage points to 2.2 per cent.
It also said it expected China’s robust expansion to continue, forecasting economic growth of 9.7 per cent this year and 9.5 per cent in 2007. “Demand is being sustained by further increases in exports and investment, underpinned by strong corporate profitability,” said the report. Base metals such as copper, zinc aluminium should rise further.
There was some severe short covering in gold and silver and in particular copper as it was a one way traffic. The bears tried their best to have control but seemed to have run out of fuel to charge further against the raging bulls. At the moment “No News is Good News” for gold and silver. This week we do not have any major market moving US economic news. Also is holiday weekend as Monday US markets are closed.Gold June futures are expiring next week. We have a series of US economic numbers from US next week which could suggest the Fed outlook on interest rates for the rest of 2006. There is also some position squaring and rebuilding going at the moment which is an indication of higher volatility.
It’s all about the US dollar and carry trade for gold and silver. Gold and silver demand in India is just one tenth of the peak demand in India. There is some sporadic jewelery demand in North and Central India. But in Southern Indian and in Western India particularly Mumbai and Ahmedabad, jewelers are sitting virtually idle. It’s just some long term investment demand that is driving volumes in gold and silver. MCX had imposed additional margins on short positions which resulted in MCX prices rising higher than justified levels yesterday. Higher stop losses is the need of the hour, expect greater two way movement unlike yesterday which was a one way traffic.
GOLD
Gold needs to break $676.10 for $696 and $714. On the lower side $654.90 is the $658.70 is the initial support with $649.10 and $638.70 as the key support levels.
SILVER
Silver needs to break $1330 for $1426 and $1480. On the lower side $1266 and $1235 are the support levels.
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