Volatility in all the major markets, be it equities, currency or commodities has been on higher side over the past two weeks. The US dollar is getting bashed up from all the quarters including the yen due to slowdown in US economy (apart from sub prime crisis). Carry traders flourish in a certain environment and low volatility. Interest rate environment is certain but volatility is high. If high volatility continues for a long time, carry trade volumes will reduce. Lower volumes in carry trade will just reduce the pace of slide of the US dollar. Volatility will be the key factor over the next few months for sustenance of carry trade.
High volatility in equity markets should benefit the gold, silver and other precious metals more as investors diversify their holdings. Investing in precious metals does not give returns like treasuries where one gets interest. However investors are soon realizing the importance of diversification which will benefit precious metals. We remain bullish in gold and silver for the rest of 2007 and expect spot gold to test $735 in 2007.
Copper, zinc, nickel and other base metals (except lead) fell on expectations that a slowdown in US economy will reduce demand for them. Global economy is less dependent on US economy for growth than it was a few years ago. Reliance on US economy will fall further over the next few years. Fundamentally all the base metals are bullish. It is only alterations in speculative element of the price which is adding to the volatility.
SILVER -- SEPTEMBER FUTURE
Silver needs hold $1307 to target $1333 and $1354. On the lower side $1294 and $1277 are the key supports.
COPPER -- SEPTEMBER
100 day MA at $138.40 is the key support and a consolidated fall below $327.60 and $315.30. Needs to break $350.60 to be in uptrend for $362.40.
NYMEX CRUDE OIL -- AUGUST FUTURE
Crude oil has to afloat over $72.15 to prevent a slide to $69.80. On the higher side $75.60 is the initial resistance with $77.50 and $79.50 as the resistances.
Happy Profitable Trading
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