The nervous, firm bias and volumeless trading in gold, silver and copper continues as Gold June future rose to a high of $655.00 while silver July futures rose to a high of $1274 in Asian trade. Crude oil prices are up ahead of the US Memorial Day weekend while US dollar is trading in a range.
Japan's consumer prices rose for a sixth month, supporting the central bank's case for raising interest rates for the first time since August 2000. Japanese bonds fell on speculation that Bank of Japan Governor Toshihiko Fukui will raise borrowing costs as soon as July. Japan has now overcome deflation and there is a very minimal risk of slipping back into deflation. The Japanese domestic demand is on the rise and Japanese companies are now less affected by global external shocks. The Bank of Japan will raise interest rates anytime after July. There will be less flow of Japanese money into global financial markets such as commodities, Indian equities and other emerging market equities. Though the interest rates rise by the bank of Japan will be only quarter of a percentage the amount will be high.
Foreign currency reserve diversification has resurfaced once againRussia said it was increasing the share of euros in its foreign exchange and gold reserves which have risen 36 per cent this year to a record $236.7bn as the world’s second biggest oil producer benefited from soaring energy prices. The news came just a day after finance minister Alexei Kudrin said Russia would save its $71.5bn stabilisation fund, financed by windfall oil tax receipts, equally in euros and dollars, with a small share in sterling. Russia’s foreign exchange reserve diversification away from the US dollar and its proposed crude oil exchange in roubles could result in a financial cold war between US and Russia. Gold, silver and other precious metals will rise as result of this. Higher crude oil price has changed the political equations of the world.
It’s a holiday weekend. Traders will either close their open positions or go long. Just before a small US holiday weekend speculators have increased the price of crude oil by $2 a barrel. What happens to crude oil prices when the US summer driving season kicks up. Crude oil prices could easily rise to $84.00 barrel very quickly. It’s all about speculation in crude oil driven by expectations and non expectations. Another reason why long term investors should think to start investing in gold and silver on any four to six percent dips from the current levels.
GOLD
As long as Gold holds $631.80 on closing basis the downside is limited. A close below $631.80 will result in $ losses to $609.65 and $588. On the higher side $654.90 is the initial resistance with $673.90 and $693 as the key short term resistances.
SILVER
Silver needs to hold $1188 on closing basis to prevent further losses to $1160. On the higher side $1266 is the initial resistance with $1308 and $1330 as the resistance levels.
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