Gold and silver pared their losses after falling for nearly three trading sessions. Gold August futures fell to a low of $621.30 while silver July futures fell to a low of $1135 before settling higher at $632.60 and $1189.0 respectively. The US equity markets first rose and then fell towards the close suggesting the traders apprehensions to carry forward their long positions. The US dollar is firm but gains for the US dollar against the major currencies is limited as European Central Bank (ECB) raises interest rates by atleast 0.25% today.
Grupo Mexico SA, the world's seventh-largest copper producer, declared force majeure on June and July supply contracts from its largest mine in Mexico because of what it said is an illegal strike. The Mexico City-based company said in a statement that workers in its Cananea mine in the northern state of Sonora walked off their jobs on June 1 and the company has been unable to convince them to go back.This could cost the company 80,000 tons in lost copper production. The demand for base metals will not reduce as global economy will grow. Base metals will rise further as global inventory fall.
Former Fed chairman Allan Greenspan said that international oil markets had become so tight that even the slightest disruptions to supply could result in further large price rises. He said the flexibility of the US economy had so far allowed it to absorb higher energy costs with little effect. The buffer between supply and demand is much too small to absorb shutdowns of even a small part of the world’s production. The balance of world oil supply and demand has become so precarious that even small acts of sabotage or local insurrection have a significant impact on prices. The effects of higher crude oil prices will not be felt immediately but will be felt over a long period of time. Higher inflation could destabilize global central banks long term macro economic policies as they have to make a choice between fiscal compulsions, economic compulsions and political limitations. Gold and silver will rise. There are very few reasons to stop gold and silver from rising in the long term.
After yesterdays pullback some of the shorts should get squared off which should further support gold and silver prices. However gold and silver are not out of the woods yet. Gold needs to close over $637 while silver needs to close over $1220 to resume its short term bullish trend, else there will be sellers at higher levels.
GOLD
Gold needs to hold $609.65 on closing basis till tomorrow else expect a slide to $588. The 100 day MA at $601.10 will be only theoretical. On the higher side $637.80 and $642.20 is the initial resistances with $654.90 as the key short weekly resistance.
SILVER
Silver needs to close over $1220on tomorrow expect a slide to $1030- $1040 next week. On the higher only a close over $1220 will result in further gains to $1277 and $1330. The 100 day MA at $1119 will be of theoretical purpose.
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