Gold and silver are consolidating at the moment but are finding buyers at lower levels. Gold and silver fell yesterday after crude oil prices fell temporarily and thereafter as crude oil prices rose, gold and silver also rose suggesting the direct linkage between bullion prices, the US dollar and crude oil prices. This link will continue for the rest of the week unless spot gold breaks $660. Silver is not linked with anyone and is at set to create new historical highs over the coming weeks.
OPEC is worried by a fall in the dollar that is eroding member states' oil revenue and ministers will take up the issue when they meet next week to discuss a further cut in output.The dollar is at a 20-month low against the euro, a bonus for non-dollar oil consumers but a threat to producers. As the global readjustment of the US dollar continues Opec will have to look for alternate currencies.The political effect of a weaker US dollar is that can disintegrate the Opec over the billing in US dollars. Iran and Venezuela are already anti US others could follow over the coming years. The net effect gold will continue to maintain the safety premium it commands.
Funds are reducing their investments in base metals and increasing their investments in precious metals which further reinforces the case for bullishness in gold and silver. Global liquidity has not increased over the past few weeks. Fund managers and retail investors will have to balance to balance their portfolio in such a way their have investments in precious metal, base metals, equities, treasuries etc. There is quicker realignment of portfolio these days which has added to the volatility.
GOLD -- FEBRUARY FUTURE
Gold needs to break $668 for $692 and $730. On the lower side as long as 641.20 holds on closing basis the downside is limited.
SILVER -- MARCH FUTURE
Silver breaks $1435 then a rise to $1530 and $1667 is on the cards. On the lower side $1355 is the key support.
Happy Profitable Trading
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