A break out of the recent trading range is in the offing this week for gold and silver.Silver September future is expiring this week. We may run into the first tropical storm in the Gulf of Mexico. Iran’s 31st August deadline to stop is uranium enrichment is there. Last but not the least we have series of US economic numbers ranging from FOMC minutes, 2nd quarter GDP numbers, August non-farm payroll numbers and the personal consumption expenditure index (PCE) amongst others.
Gold and silver have been consolidating in $624-$640 range while silver September future consolidated in $1200-$1270 range. Crude oil future and the US dollar remained firm. This week all the event risk will add volatility and also prevent traders from going short. What a way to end the summer.
Silver held in the ETF climbed closer to the 100 million ounce mark, rising to a record 97.9 million ounces (3,044 tonnes) on 23rd August , about 15 percent of global mine output of 640 million ounces a year. Exchange traded funds (ETF’s) are certainly supporting gold, silver prices.
Identifiable silver stocks fell to 608 million ounces by the end of 2005 from 723 million a year earlier. It is also held by hundreds of millions of households in relatively small amounts. In contrast, the total above-ground stock of gold, cumulative historical mine production stood at 155,500 tonnes by the end of 2005, of which more than 50,000 tonnes were held by central banks and private players. Most of silver goes into physical demand and doesn't come back so readily. Once silver has been converted into an industrial product, it's no longer near market stock whereas gold jewellery is still relatively near the market. This is one of the prime reasons why silver will outperform gold in annualized gains terms over the months and year.
The rise in Japanese investment from October 2005 started the real bull rally in gold, silver and metals. Metals markets could see renewed inflows of billions of dollars in the next few years as financial firms in Japan hike exposure in hopes of big returns. Wealthy retail investors and small and mid-sized institutions have already bought a variety of instruments linked to oil and metals, including bonds and funds. The value of commodities-linked investment trust funds, which are placed publicly in Japan, has jumped to about $1 billion from around $70 million when they were first offered in late 2004. But the market could explode should big institutions, such as mega-banks, life insurers and major pensions, decide to shift part of their assets into commodities.
GOLD -- DECEMBER FUTURE
Gold certainly not out of the woods and needs to hold $616.80 on closing basis to prevent a slide to $594.60. Initial support stands at $626.80 and $623.20. Resistance is at $634.50 and $639 and key short term resistance at $645.50.
SILVER -- SEPTEMBER FUTURE
Silver needs to hold $1207 on closing basis to prevent a slide to $1162 and $1137. There will be sellers over $1250 unless there is a convincing break of $1268. A convincing break of $1268 will result in $1292 and $1320.
Happy Profitable Trading
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