It’s a long holiday weekend and traders are either going to square off or go long. Oil prices over $60 a barrel and a weaker US dollar will prevent gold and silver from falling. Last year in the thanksgiving holidays Japanese investors pushed up gold by more than $15 in a single day for the first time, which gave way to the bull-ion gold. Let’s see what they do this time. Base metals were led by zinc which is on the way to test the all time high.
A slowdown in the housing market drove the White House on Tuesday to lower its forecast for U.S. economic growth for this year and next. The Bush administration forecast that real gross domestic product growth this year will be 3.1 percent, down from an earlier forecast in June of 3.6 percent. For 2007, the administration projected GDP growth of 2.9 percent, down from the more upbeat 3.3 percent earlier GDP growth forecast. The bad news on US economy has been factored in by markets and a stronger growth will prevent the US dollar from a collapse. We expect the Fed to continue with its interest rate pause but a rate hike could be a possibility in May 2007 as the lagging effects of crude oil prices will felt by way of higher consumption and greater demand for commercials. Gold and silver may consolidate in a wider range for the time being and may through a period of low volatility with successive lower base getting higher.
Metals exchanges in New York and London look set to go head to head in the race to launch a new type of futures contract aimed at attracting more powerful fund investors to the sector.A key vote at the New York Mercantile Exchange on Monday brings it closer to competing with the London Metal Exchange for so-called "mini" metals contracts that can only be traded electronically, a source close to the company said.Members of the COMEX, the metals arm of NYMEX, voted on Monday for a transaction that will allow the exchange to offer a new slate of products including a contract similar to the LMEminis that the London exchange is planning to launch on December 4. LMEminis are small, cash-settled contracts based on the main futures contracts, do not involve delivery of metals and will be for 5 tonnes rather than 25 tonnes for existing contracts. More and more instruments for trading and betting in metals are coming up all over the world in order to encashon the commodity investment boom. The base metal boom will last for few years but should be a boom to bust story after 2010. Precious metals are bullion boom is here to stay even after 2010.
Gold will continue to be linked to the US dollar as well as crude oil prices. Silver is a sleeping dragon. Copper and zinc have managed to hold on to their key long term supports and if they are able to hold to the same for the rest of the month we could see new highs over the coming months.
GOLD -- DECEMBER FUTURE
Gold needs to break $632.20 for $639.30 and $657.30. On the lower side $613.90 and $606.60 are the key supports.
SILVER -- DECEMBER FUTURE
Silver needs to break $1335 for further gains to $1430. On the lower side $1277 and $1244 are the support levels.
Happy Profitable Trading & A great thanksgiving vacations. We will be back on Monday.
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