Iranian risk and extended holiday weekend has resulted in gold and silver edging higher. Gold December future rose to a high of $635.80 while silver December future rose to a high of $1308 in Asian trade. As expected, Iran has defied the UN deadline to stop its uranium enrichment programme and faces sanctions. The five permanent members of the United Nations Security Council and Germany will meet Sept. 7 in Berlin to discuss Iran's stance on uranium enrichment.
The United States and three European allies are assembling a list of sanctions they would seek in the UN Security Council, beginning with restrictions on Iranian imports of nuclear-related equipment and material. Eventually, punitive measures might expand to restrict travel by Iranian leaders and limit the country's access to global financial markets. United States, Britain, France and Germany’s push for sanctions faces a high hurdle in the council, given the Russian and Chinese possession of veto power and their opposition to discussion of serious punishment for Iran. U.S. officials expect the debate within the UN security council to take weeks, and say it could extend through the opening of the UN General Assembly in mid- September, an event that will include a speech by President George W. Bush and meetings with other heads of state. The Bush administration is preparing to use those meetings to press for the sanctions resolution, just as it used the same meeting four years ago to begin to build its case for demands against Iraq. Unlike the Bush administration's effort four years ago, however, U.S. officials appear to be shying away from using intelligence information to build their case. Instead, they are citing Ahmadinejad's public statements and the Iranian refusal to comply with the council resolution passed in July, with support from Russia and China. Diplomatic channels will fail to prevent Iran from achieving its nuclear ambitions.
Sanctions are the first step before a war in Iran. Crude oil will rise as a result Iran. We continue to maintain $84 as the target for crude oil. Higher crude oil prices will support gold and silver. Gold and silver may well have bottomed out in August. Personal consumption numbers from US suggest that US growth may stabilize a bit. Global crude oil demand will either stabilize or rise in the coming years. There will be pressure on crude oil refineries. Economics of demand and supply will support gold, silver and crude oil prices over the coming weeks and months. Gold and silver will soon be delinked from the US dollar as summer trading comes to an end.
GOLD -- DECEMBER FUTURE
Gold needs to break and hold $642.50 for $657 and 668. On the lower side $624 and $621 are the initial support levels with $616.60 as the key short term support.
SILVER -- DECEMBER FUTURE
Silver targets $1344 and $1392 as long as its holds $1282 on closing basis. On the lower side only a consolidated fall below $1282 will result in $1246 and $1202.
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