Gold, silver, copper and other metals are consolidating after three days of massacre. All the news of inflation are now behind us and markets have 100% priced in that the Fed will raise interest rates in end of the month meeting with a possibility in August also. Economic from US suggest that there is a slowdown in growth due to higher crude oil prices and interest rates. Gold August future settled at $566.50 while silver July future settled at $973.50.
It’s the Japanese investors which had started the gold and silver’s historical rise yesterday and they also contributed to the slump yesterday. Gold August future fell to a low of $546.40 while silver July futures fell to a low of $945.00 in Japanese session yesterday. Gold and silver may have bottomed out. The risk to return ratio in clearly in favour of the buyer for the medium term investor as well the long term investor. The downside risk in the worst case for gold and silver is between 12% to 15% in the worst case. The upside risk is between 55% to 65% for the long term investors.
Investment in China's real estate, factories and other fixed assets unexpectedly accelerated in May, putting more pressure on the government to curb bank lending. Fixed-asset investment in towns and cities climbed 30.3 percent to 2.54 trillion yuan ($318 billion) through May, the Beijing-based National Bureau of Statistics.. The increase compares with a 29.6 percent gain in the first four months and 26.4 percent in the same period last year. If Chinese economy does not slow down it could be boom to bust story which cold have catastrophic effect on global economy as well as money. Gold and silver will only rise if there are signs of a soft landing of the Chinese economy as investors switch to safe havens.
Investment in gold and silver are much better than real estate investment. In India group of people are forming real estate clubs with the prime motto to invest in real estate all over the India. There is a lot of formalities and paper work to be completed while investing in real estate. Investing in gold and silver is a very simple and quick process. Exit option in gold and silver is the fastest and can be done 365 days a year. If want to sell property then it will be days before the deal is done and payment is received. I am writing this for those investors who have invested more than 60% of their investments in real estate. These investor class should now also diversify into gold, silver, platinum else they will regret.
A word for the Indian trades who have long positions in gold silver in MCX and NCDEX. My experience is that these traders just sit back and leave their open positions for a long period of time and when prices rise over the price they exit and if prices fall they incur huge losses. My advise to them is to keep on doing their daily trading or jobbing do not leave any open position for next day and use strict stop losses in intra day trades as well. The main aim is to ensure that small profits keep on accruing and at the same time this helps to ensure the burden of higher margin calls.
Most of the major market economic moving news are now behind us and markets will wait for the Fed meeting. Whatever US and Eurozone economic numbers are there will not affect gold and silver in a big way. Gold and silver will see a technical movement from now on. Technically gold and silver are highly over –sold.
GOLD
Gold needs to break 578.60 and close over $603.10 for further gains. On the lower side $557.80 and $545.40 are the initial support zone with $537.20 as the key medium term support.
SILVER
Silver needs to break $1008 for further gains to $1060 and $1084. On the lower side there are supports at $932, $898 and key medium term support at $878.
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