The G7 meeting urged China to make its currency more flexible, while dropping an explicit call for it to strengthen. ``Greater exchange rate flexibility is desirable in emerging economies with large current-account surpluses, especially China,'' the G-7 finance ministers and central bankers said in a statement that omitted April's call for an appreciation in the yuan. The US dollar gained against the Asian currencies after the G7 meeting. However in our view, the US dollar will fall towards the close of 2006 and that the current gains will be short lived.
US treasury secretary Paulson wants IMF to define define ``acceptable country- specific exchange rate policies.'' China and Japan opposed calls by Paulson for the International Monetary Fund to police ``misaligned'' currencies, saying the role is outside its mandate
and wouldn't solve global trade imbalances. US in order to protect the long term decline of the US dollar is trying to use IMF for its own interest. Everybody knows that if the value of the US dollar declines, the US grip in global financial and political world will reduce.
Crude oil has fallen for the highs. Crude oil fell because it had hurricane risk premium, Iranian risk premium and terror premium, none of which happened so far in 2006. So the fall was imminent. Crude oil future fell to a low of $62.03 on Friday and there after rose as comex gold and silver future closed. Gold and silver tracked crude oil future and rose tracking crude oil prices. Event risk will dictate the movement of crude oil prices. US peak crude oil demand for 2006 is over. Lowering of 2007 global growth forecast by IMF and other agencies further contributed to the fall in prices. However these agencies keep on changing their forecasts. Lower crude oil prices will stimulate growth. Crude oil’s long term bullishness is not over.
US and developed nations are pressuring China to revalue the yuan. A Chinese revaluation is always bullish for gold and silver as it will increase demand form China and Asian nations. This month will also mark the end for central bank sales and there will not be any major central bank sales for quite some time.
Technically gold and silver have room for further losses. Value based buying at lower levels will maintain the long term uptrend. There is change in investment pattern in the commodities pack in India. The fall in gold and silver has resulted in losses for retail trader in India. They are now switching from trading in gold and silver to agricultural commodities. There are a large number of agro commodities which do provide trading opportunities. However agro commodities have a cyclical pattern, while gold and silver are ever green.
GOLD -- DECEMBER FUTURE
Gold needs to hold $574.80 on closing basis to prevent a fall to $542.50 and $528.50. On the higher side $586.50 and $601.50 as the resistance zones.
SILVER -- DECEMBER FUTURE
Silver can fall to $1045 and $1008 if it closes below 1002. On the higher side $1151.50 is the resistance zone.
Happy Profitable Trading
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