Gold, silver and other precious metals and base metals fell yesterday after news of an expect peace between Israel and Lebanon but subsequently pared its losses. Gold August future fell to a low of $602.50 and silver September future fell to a low of $1068 before settling higher at $613.20 and $1092.00. US equity markets rose while crude oil futures are back over $75.00 a barrel.
It’s all about liquidity and technical trading this summer as far as gold and silver are concerned. Markets are at the moment focused on interest rates and yesterday there wasn’t any US economic numbers. Higher stock markets increases liquidity and the surplus money goes into metals and soft commodities. This phenomenon has been observed in 2006 gold and silver will soon be delinked from global liquidity cycles. Volatility will increase in gold and silver for the rest of 2006, there will higher two way movements (instead of a one way traffic) with the successive year on year lower base getting higher, confirming that the long term bullishness remains intact. Silver is more bullish than gold and the annualized return will greater than all the metals.
One needs to keep a close watch on the developments between Israel and Hezbollah. If Syria and Iran are dragged then gold and silver will zoom. Higher crude oil prices due to refinery maintenance in US, Venezuela and other parts of the world along with the hurricane premium will support gold and silver prices from a sharp decline
GOLD
Gold needs to hold $618.80 for 632 and $637. A consolidated break of $637 will result in re test of short term resistance at $645.00. The technical congestion at between $609.0 and $609.80 has been held on closing and gold needs the hold on to $609.15 at close today.
SILVER
Silver looks solid as long as it holds $1041. Silver should break out of the recent trading range soon of $1068 - $1135 zone. $1172 and $1012 are the key resistance and support levels.
Happy Profitable Trading
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