The inverse correlation between the US Dollar and crude oil versus gold and other precious metals continues. The US dollar gained on expectations that the Federal Reserve will raise interest rates sooner than expected which will result in a narrowing of the interest rate differential. For the rest of the week precious metals will be dictated by the US dollar and crude oil prices. The rise in gold and silver has not been backed by adequate physical demand. I always believe that unless the rise is backed by a simultaneous increase in physical demand, the chances of an equal steep crash/fall rises with every increase in price. ETF demand is basically paper investment. ETF demand can shift (increase or decrease) anytime when risk returning ratio in other investment avenues change. Average Intra day volatility should rise to two percent in precious metals and energies for the rest of the quarter.
Volumes in LME are thin. Base metals are basically directionless due to thin volumes. Lead is positive as the rise is backed by physical demand. Some of the Chinese factories producing base metals will close down around the Olympics due to power scarcity and reduction in global demand for base metals. One needs to look for a bottom in laggards such as zinc and nickel and then invest. One should remember that the value of zinc and nickel will not be zero.
COPPER -- SEPTEMBER FUTURE -- INTRA DAY PIVOT: $378.10
200 day MA around $354 is the key support. Resistance is at 100 day MA around $378. fall below $354 will result in $347 and $339.
HAPPY PROFITABLE TRADING
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-- Posted Wednesday, 23 July 2008 | Digg This Article | Source: GoldSeek.com
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