Ever try to dress up a big, sooner or later the make up cracks. That’s what is happening to the US dollar. The US dollar has been put in the paper shredder on the back of sub prime mortgage scams, despite some firm statistics of US economy. It’s just that other countries are showing more future potential than US economy which has resulted in the US dollar collapse. Gold and silver have disappointed so far in 2007. They are rising on the back of higher crude oil prices, re-emergence of geopolitical risk and a weaker US dollar. But negative year on year returns has prevented short term hot money pouring into them, which has not given them the much needed spike. They are in a consolidation phase before the next major move. However if crude oil falls or the US dollar makes a mild recovery, it will be negative for gold and silver assuming there is no escalations of tensions in middle east.
Iran has asked Japan to Pay Yen for Oil, Start Immediately.This was the key news for precious metals last week. Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. Iraq was attacked by US and its allies as it tried to bill crude oil in currency other than the US dollar. Iran may get the same fate as US air force increases its presence in Iraq and US giving more and more time for Iran to abandon its nuclear weapons. US has raised its Al-Qaidea threat which could just be a gimmick to attack Iran on pretext of supporting terrorists and Al Qaidea. Bullish for crude oil and precious metals. Bearish for US dollar.
There is a slow and steady rise in global terror threats. After the failed UK terror attack and the militants taking over a mosque in Pakistan, global terror alert has increased. Iran is also under pressure to abandon its nuclear ambitions and time seems to be running out for them. Geopolitical risk will result be positive for crude oil and precious metals. Unlike the 2006, Israel – Lebanon war, the weaker US dollar is the key difference. One should expect higher volatility over the next few weeks.
GOLD -- AUGUST FUTURE
Gold needs to hold $667.60 for $674.70 and $680.30. On the lower side $663.60 and $661.10 is the initial support with $657.60 as the key intra day support.
SILVER -- SEPTEMBER FUTURE
Silver needs to hold $1307 for $1339 and $1372. On the lower side as long as $1300 and $1277 are the initial supports. Only a consolidated fall below $1288 will result in $1277 and $1254.
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