At the beginning of the week we mentioned that soccer world cup is over and the gold cup has begin. The gold cup is yet to be over as gold august future reached a high of $667.30 while silver September future reached a high of $1171.Crude oil prices reached a new high of $78.40. The US dollar has gained while Dow Jones closed below the 11,000 mark in may months.
There is severe safe haven buying due to clashes between Lebanon and Israel, Iran nuclear issue has once again started picking up. Now the double whammy in the form of crude oil supply disruptions in Nigeria. Crude oil future rose to a high of $78.40. Hezbollah militants fired rockets from Lebanon into Israel's third-biggest city after Israeli forces bombed Beirut international airport and other targets. A Nigerian newspaper yesterday reported that rebels had attacked pipelines, later denied by the owner of the facility, Italy's Eni SpA. The safe haven buying will continue and there will be greater physical demand of gold and silver across the globe.Physical traders will once again start building up their inventories as a result on sudden rise in prices.
Crude oil prices oil are going to near $100.00. It’s still a very long way to way, but the middle tensions and supply disruptions, potential hurricane threats in the Gulf of Mexico will prevent traders from going short. Other than geopolitical risk and crude oil related risk there is no other reason for the rise in gold and silver prices. Physical demand is absent in most parts of the world. However the current rise will just stimulate demand as laggards start to invest.
Crude oil prices at $77.60 a barrel in July and the average crude oil price is over $70.00 a barrel. Markets expect the Fed chairman Ben Bernanke to stop raising interest rates after August. If crude oil does not fall then inflation will rise and the US trade deficit will balloon. Mr. Bernanke will have to raise interest rates after August in order to contain crude oil induced inflation. It’s not just the Fed but other global central bankers will have to continue raising interest rates for the rest of 2006. This will reduce global growth rate in 2007 onwards. 2006 could be the top of global growth and global rates should stabilize near 4.20% to 4.30% in 2007 and 2008. Gold and other precious metals will rise as they are best hedge against inflation.
It’s weekend and traders will continue to buy on dips and go long, despite and excellent week. The bank of Japan meeting will not have much of an impact on bullion prices.
GOLD
Gold needs to break $676.00 for $692.60 and $713.20. On the lower side $656.50 is the initial support with $642.80 as the key support.
SILVER
Silver needs to break $1200 for $1242 and $1320. On the lower side $1160 is the initial support with $1136 and $1110 as the key support. Silver has not risen in comparison to gold. It’s a sleeping dragon.
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