Carry traders should now push now gold and silver higher as the US dollar weakens against the major currencies. Carry traders were relatively absent from the markets as the US dollar remained firm over the past three months. Carry traders will be present in every commodity and dictate them for the rest of 2006. The performance of the US dollar will be the key as a slowdown in US economy affects every country. Eurozone has been is growing on the back of soccer world cup and lower crude oil prices. Once the lagging effects of soccer world cup on Eurozone economy gets over, then only the real picture on Eurozone will emerge. Japan is recovering and the Japanese companies are trying to reduce their dependency on US exports. In 2006 G7 economic growth will remain stable but in 2007 there could be a minor slowdown if crude oil prices break 2006 high of $79.90.
Crude oil managed to hold $57.0 support while the US dollar weakened on fears of a US economic slowdown. Gold December future has managed to hold $604 on closing future and certainly looks headed for $640. Silver as usual is bullish. Its now more of an investment demand that will drive gold and silver prices. Physical demand from India will not reduce substantially over the coming weeks and months. Yesterday physical gold prices in Calcutta were Rs.50 (per ten grams) higher than gold prices in Delhi. Physical prices in Calcutta were trading at a premium, a reflection of the demand in India.
Crude oil is not out of the woods yet and needs to hold $57.0 on closing basis, US weekly inventory numbers will dictate the prices. As long as gold December future holds $604 on closing basis, the downside will be limited. Silver needs to hold $1199 on closing basis to prevent further losses. The trend is bullish but volatility will also increase.
GOLD -- DECEMBER FUTURE
Gold needs to break and hold $614 for further gains to $634. On the lower side $595.10 is initial support with $582.20 as the key support.
SILVER -- DECEMBER FUTURE
Silver targets $1256 and $1290. On the lower side $1228 is the initial support and $1199 and $1182 as the key weekly supports.
Happy Profitable Trading
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