-- Posted Monday, 12 October 2009 | Digg This Article
| | Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
The Singapore economy expanded a better-than-expected 0.8 per cent in the third quarter of 2009 from a year earlier, returning to growth after three quarters of annual contraction. The Chinese economy and other emerging markets economic growth are also recovering. Interest rates in emerging markets will rise as they move on a sustainable path to recovery. This will be positive for base, energies and silver.
Central bank foreign currency reserve diversification picks up pace…
Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
Effect: Gold, emerging markets currencies and other safe havens will rise as the world adjusts itself with a less powerful US dollar. I have been writing this for the past few years but the man on the street is witnessing the same.
The momentum as well as the technicals are all positive for base metals and energies. For gold, one should remain on the sidelines despite the bullish trend.
TECHNICAL VIEW
COMEX GOLD DECEMBER
Gold needs to break $1062-$1077 zone by next week else there will be a correction to $1021 and $1004. For the whole week as long as gold holds/trades over $1032-$1037 zone downside risk will be limited.
DISCLOSURE: NO POSITIONS
AS THE WORLD MOVES AWAY FROM THE US DOLLAR
There is a general fear among the man on the street that the US dollar may not be the reserve currency of the world and that the search for replacement Or alternate to the US dollar has begun. This has resulted in US dollar weakness, commodity prices rise, sharp gains in emerging currencies and emerging market stocks. It’s all about the US dollar for the time being. Imagine a world without US dollar as the main currency. Imagine that gold, silver, crude oil or soybeans are not quoted/prices in US dollars. They are quoted in some other currency or some other form. How will the global banking system adjust to the same? What will be the mode of exchange between central banks and countries? Gold is benefiting from the expected switch over from the US dollar into some thing else. What is that something else we do not know. There is no other reason for gold to rise. Fundamentally gold is the weakest among all metals and energies.
Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
What will happen to energies and agro commodities if they are not quoted in US dollars? India and other countries import huge amounts of crude oil and other food stuff. What will be the mode of payment to the sellers/producers? These are some of the unanswered questions which time will tell.
Effect: Gold, emerging markets currencies and other safe havens will rise as the world adjusts itself with a less powerful US dollar. I have been writing this for the past few years but the man on the street is witnessing the same.
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, 12 October 2009 | Digg This Article | Source: GoldSeek.com
