A combination of strong US dollar and lower crude oil prices resulted in gold and silver falling yesterday. Crude oil fell on expectations of higher inventories today. A strong US dollar has surprised every body in a view of a pause in Fed interest rates. Interest rates are not affecting the US dollar anymore. Bond prices also fell along with gold and silver and 10 year yields reached their highest in three weeks yesterday.
The US dollar has hit a 10 month high against the yen. A weaker yen should result in resumption of arbitrage between comex future and the TOCOM. Last year it was around the same time that this arbitraging started the gold and silver rally. Although it too early to comment on the scale of arbitraging, a weaker yen will support gold and silver prices as traders buy comex futures and sell tocom futures.
Gold and silver are technically bearish but in a neutral zone. There are sellers at every rise and there is an increase in net short positions as lower crude oil prices have dampened inflationary expectations. Traders are using spikes to go short. There should be a break out the current trading range soon. One should keep on booking partial profits on their intra day positions till a firm short term is established.
GOLD -- DECEMBER FUTURE
A break of $586.50 will result in re test of $600 and $614. On the lower side $574.20 is the initial support with $562.60 as the key short term support.
SILVER -- DECEMBER FUTURE
Silver needs to break and hold 1152 and $1184 for $1220 and $1256. On the lower side $1124 is the initial support with $1105 as the key short term support. Only a consolidated fall below $1105 will result in further losses to $1078 and $1055.
Happy Profitable Trading
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