-- Posted Monday, 9 March 2009 | Digg This Article
| Source: GoldSeek.com
WEEKLY TECHNICAL REVIEW AND OUTLOOK
Last week was mixed for gold and silver as they fell in the first half and rose in the second half. Interest rates have been cut by half a percentage by the bank of England and the European central bank. US February payrolls numbers were in line with expectations. Most of key event risk and economic data risk are now behind us.
Another thing which I observed was that there was an inverse relationship between precious metals and stock indices. Even on an intra day basis gold and silver fell whenever US equity markets turned positive and gained when US equity indices turned negative. Fresh inflows into the gold exchange traded funds have virtually come to a halt. The search for a long term bottom in equities continues this week too. With every major fall in equities the risk to return ratio moves in favor of the long term investors. Investing in equities for the long term is right but there is still no certainty as to when the markets recover and start its bull run.
Crude oil and energies rose last week on expectations that the Chinese economy and other Asian economies will start to grow once again. Further value based buying at lower levels has also resulted in gains.
SAFEHAVENS – SOME OF THE POSITIVE FACTORS AND NEGATIVE FACTORS
POSITIVES
- Global economic uncertainty still prevails.
- Ultra low interest rates favor investment in safe havens.
- Bankruptcy news continues to flow in. Last week we had general motors.
- Employee firing/retrenchment is still there although the pace has reduced.
- There is still lack of alternate investment.
- Long term technical are still positive.
- Policy measures to combat the current recession are not tried and tested.
- Investment demand continues to remain high.
NEGATIVES
- Lack of demand for gold. There is hardly any physical demand for gold at the moment in Asia and the rest of the world.
- The trickle down effect of policy measures to combat the recession may start to show positive results in the second quarter.
- Value based buying in other investment could result in flows of investment in other sectors.
Positive factors out number negatives. However with high volatility this can change overnight also.
BASE METALS AND ENERGIES- SOME OF THE POSITIVE FACTORS AND NEGATIVE FACTORS
POSITIVE FACTORS
- Technically a long term bottom seems to have been formed.
- Long term investors are investing.
- The pace of decline in demand has reduced.
- Decline in LME metal stocks and decline in US energy inventories for the first time last week.
NEGATIVE FACTORS
- Fundamentally still negative due to lack of demand.
- Short term investment interest not there.
- Global stocks are still very high.
With every passing month, the chances of a recovery in the global economy rises which is positive for base metals and energies. If the reverse happens over the next few months then expect new multi year lows to be created in base metals and energies. I am positive in base metals and energies in the medium term to long term and view them as a great long term investment on declines.
NYMEX CRUDE OIL
- A small bullish formation has been formed and I am optimistic that crude oil will be able to gather the necessary momentum to edge higher.
- Crude oil needs to break the $48-$52 zone to target $60 over the coming weeks. Failure to break $52 will result in a fall back to $38 and below.
- Key levels to watch: $38.80, $42.50, and $49.60
- Weekly traders buy on dips as long as $40-$42 zone holds.
- Investors invest below $40 (if prices come)
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 employees have 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. Prepared By Chintan Karnani. Website www.insigniaconsultants.in
-- Posted Monday, 9 March 2009 | Digg This Article | Source: GoldSeek.com
