Gold and silver benefited from US dollar bashing and unstoppable copper and crude oil prices. Technical break out in gold and silver further contributed to the rise. It’s more of a dollar decline story for gold and silver than anything else. Gold and silver bears surrendered to the bulls. Over the past five years since the commodity Bull Run began the dominance by bears have been short lived. It remains to be seen how long the US dollar will fall as trading volumes have fallen. Bank of England (BOE) will raise interest rates once or twice year. European central bank (ECB) is expected to raise interest rates once. This has already been discounted in by the markets. Once interest rates are hiked, sterling and euro could fall. If ECB hikes interest rates more than once and BOE more than twice that the US dollar will continue its slide for the rest of 2007 without a major correction. Lagging effects of higher interest rates will result in reduction of liquidity. It’s not that the US dollar will stop its decline. It’s the question of pace of decline.
Terror threats across UK and US is also supporting precious metal prices. As soon terror risk premium falls one should expect higher volatility. Half yearly numbers of US companies will start to come up from the middle of the month. Traders are buying stocks on expectations of excellent numbers. Even if a few of them disappoint, expect a short term correction in equities.
COPPER -- SEPTEMBER FUTURE
Copper can target $360 and $368.70 as long as it holds $347. A consolidated fall below $347 will result in $337.60.
NYMEX CRUDE OIL -- JULY FUTURE
Crude oil needs to break $71.25 for $72.67. On the lower side $69.76 is the initial support with $66.80 as the key support.
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