Zinc jumped the most among the metals as three month London metals exchange (LME) touched a high of $3800. Copper and other base metals also rose on higher demand. The rise in base metals also resulted in silver shooting up. Demand factors will continue to attract speculative interest in gold, silver and other precious and base metals. Euro zone economic growth in the second half of 2006 and early 2007 will be slower than previously expected, the European Commission said, adding caution to upbeat views from top officials of the currency bloc. The lower forecast came without an explanation. For the first quarter of 2007, the Commission effectively halved its growth forecast. It projected a slowdown to between zero and 0.5 percent, against 0.2-0.8 percent previously. An expected slowdown in Eurozone and US economy will not have much of an impact on demand for base metals as its Asia and other developing nations which will be the mantle for global growth. Speculative interest will rise and fall which will only increase the volatility in silver, copper and other base metals.
The International Energy Agency trimmed its 2007 global oil demand growth forecast by 90,000 barrels per day to 1.45 million bpd because of slightly weaker U.S. demand. The change in the IEA's monthly market report follows a downward revision of 100,000 bpd last month.It also pared back its forecast for non-OPEC supply growth by 120,000 bpd to 1.68 million bpd, compared with its September report. The IEA keeps on changing the forecast of global crude oil demand and supply and are inaccurate. Its forecast has no relevance to speculators as well as investors. Crude oil futures fell to a low $57.37 and is trading at $57.57 a barrel. Crude oil future has a strong support between $55-$56 and as long these levels, the downside will be limited for crude oil.
Euro has sold off against the US dollar for seven consecutive days, which is the longest stretch of weakness since June when it also faced seven days of continuous losses.There has only been one instance over the past seven years that the euro has sold off for more than seven days, which was back in August of 2003. Bottom for the US dollar against the major currency pairs is nearing. A weaker US dollar always supports gold and silver prices.
Cautious optimism is all I can comment on gold and silver for the short term, despite being technically bearish. Crude oil as well as the US dollar will continue to play with gold.
GOLD -- DECEMBER FUTURE
$573.80 is the initial support. A consolidated fall below $573.80 will result in further losses to $562.60 and $548.70. $586.50 is the initial resistance on the upside with $600 as the key resistance.
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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