Gold and silver fell yesterday but have managed to hold key medium term supports. Unless spot gold falls below $845 and remains below $845 for a week or two physical gold demand will rise with every fall. The direct correlation between crude oil prices and gold will continue in the absence of major market moving news. The market will be looking forward to the bank of England meeting and the European central bank meeting for direction. Unless there is a technical break out (on the higher side), spikes should be used as an opportunity to go short (only for day traders and jobbers). One also needs to watch for short covering. Copper and other base metals should form a bottom before the Olympics end. We expect base metals to rise between ten percent to fifteen percent (from the lows) after the Olympics are over as China reopens closed factories.
EURO US DOLLAR AND GOLD RELATIONSHIP
There has been more or less a direct correlation between euro and spot gold prices.
Euro/US dollar is expected to fall over the next few weeks and the medium term direction into early 2009 is bearish. If the direct correlation is to continue then gold prices will fall to between $700-$750 in 2009.
However greater physical demand and greater investment demand should limit gold’s fall and also the pace of fall in gold prices.
RISK TO THE ABOVE VIEW
Global uncertainties (economic as well as geopolitical) rise thenthere will be delinking between gold and euro prices.
Global growth slows down further and there is lack of alternate investments.
Mines continue to be plagued by power problems in South Africa and other countries which has the effect of reducing production.
Disclaimer:Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employeeshave any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information.
Nothing in this article is, or should be construed as, investment advice.
-- Posted Thursday, 7 August 2008 | Digg This Article | Source: GoldSeek.com
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