Mild Unwinding of yen carry trade resulted in technical break down in silver and gold which triggered stop losses. Silver fell like a pack of cards in its true style. Silver has the tendency to rise as well fall sharply on its day and if one caught on the wrong side of the trade stop losses may not be triggered.Silver bears have been successful as July future is closing this week and a large numbers of low risk traders and investor were forced to square off their long positions. Gold also fell but was better off than silver. Copper also fell marginally but was supported by partial strike by mine workers in Peru.
It is not just the Fed meeting but also rise in treasuries which caused the fall. Investors are buying more treasuries as a resulted on the bear sterns fall out. They are scared that more could some up in the collateral debt market which could impact the US economy. This has resulted in aversion in favour of treasuries.
There has been a delinking between commodities and currency markets and equity markets. This will continue. It’s case of gold and silver versus alternate investments which have no holding cost. Geopolitical risk are not in the headlines with North Korea agreeing to dismantle its nuclear programme. Iranian diplomacy continues. Physical demand in India will rise multi gold as prices near INR 8500 per ten grams. There are investors who are waiting to buy physical gold as when price near INR 8500 and below. Expect higher volatility and if gold and silver manageto hold yesterday low, we may have bottomed out.
COPPER -- SEPTEMBER FUTURE
Copper needs to float over $331.60 to prevent further losses to $327.30 and $321.30. $307.60 is the key medium term support. Resistance is between $340-$344.
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