Base metals especially copper took the biggest knock down as more and more economic numbers from US suggest that a slowdown is in the offing in the worlds largest consumer country. Copper July futures fell more than 5% from a high $333.50 to settle at $313.55. The companies in US are patiently waiting from more signs of a slowdown in US economic growth before they start more layoffs. The culprit is Fed chief Ben Bernanke’s move to control crude oil induced inflation through higher interest rates and at the cost of growth. The slide in base metals also affected gold and silver as gold August future fell from a high of $598.40 yesterday to a low of $582.40 in Asian trade. Silver July future also fell to a low of $1012.0 today off the highs of $1065.50 yesterday.he US dollar has gained a tad despite some weak economic numbers from US due to the Fed meting next week.
A slowdown in US consumption will not affect Japanese, Eurozone and also demand and growth in a big way. Japan and Eurozone are slowly reducing their dependence on US exports to domestic demand and exports to emerging nations like India. There is paradigm shift towards India, Brazil, China from US in all the developed nations. This has resulted in Japan, Eurozone showing signs of an economic recovery less dependent on US demand. More and more countries are resorting to bilateral trade instead of multilateral trade. This is new fad and fashion among every country. The net effect is a long term weakness in the US dollar as demand from US dollar reduces in global trade and higher gold and silver prices as higher per capita income will result in higher gold and silver demand from non traditional gold hungry countries like Japan, Germany etc.
The Bush Administration has made no secret this week of its frustration with Iran, over its slowness to respond to a U.S.-backed incentive package to resolve the nuclear standoff. After President Mahmoud Ahmedinajad said on Tuesday that Iran would make a formal response by mid-August, although other officials have suggested it may come sooner, President Bush himself complained that "it should not take the Iranians that long to analyze what is a reasonable deal." European diplomats too have indicated that they expect an Iranian response by mid-July, when the G8 convenes in Russia. But even if Iran's response is delivered by then, the likelihood is that it will hold even more frustration for the Bush Administration. That's because officials in Tehran are not treating the Western offer as the ultimatum that U.S. officials have made it out to be, but merely as the beginning of a drawn-out negotiating process. The Iranian leadership is engaged in
intense debate aimed at formulating a counter-offer, one that would satisfy the international community's goal of making sure Iran's nuclear program is confined to civilian uses while at the same time pushing back on some of the specific demands made by the U.S. and its allies. The Bush administration endorsed a Senate proposal to extend 10-year-old sanctions against Iran that are designed to deter foreign companies from making energy sector investments in that country.
Gold and silver are firm and holding key medium term technical support levels without the affect of geopolitical uncertainties and higher crude oil prices. The US hurricane season is underway. Even with no hurricane in sight crude oil prices are floating near $70.00 a barrel. If there is big category 5+ hurricane in this US summer then crude oil prices could jump $84 a barrel. Gold and silver will rise due to higher crude oil prices and geopolitical risk.Interest rate factors may drag down gold and silver in the short term, which are buying opportunities.
The tussle continues between Japanese commodity traders and their European counterparts. For more than a week, if Japan drives up gold, European traders try to bring it down and vice –versa. Gold and silver need to close over $585.60 and $1041 today for further gains next week. The Fed comments after the interest rate hike next week could determine the price direction for July. There could be another 5% to 7% correction (if at all it happens) in the short term which will be like a freebie for retail investors to buy or invest in gold and silver.
GOLD
Gold failed to break the 100 day MA at $602.80 as traders used the rise to exit the long positions. Initial support stands at $585.00 and $577.40 with $566.40 as the key intra day support.
SILVER
Silver needs to break and close over $1041.00 for $1071 and $1110.00. On the lower side $1008 is the initial support with the 200 day MA at $968 as the key support level.
Happy Profitable Trading & A Great Weekend.
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