-- Posted Tuesday, 9 February 2010 | Digg This Article
| | Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
EURO’S LOSS IS GREENBACKS GAIN
The Euro’s loss is The US dollar’s gain. The Euro was considered as one of the contenders for the replacement to the US dollar as the world's reserve currency. More or less this is history now and the euro as a currency has fallen back by at least two years to three years in this league. Unmanageable Fiscal deficit uncertainties and lack of proper fiscal management in Greece, Spain and Portugal has been the culprit. There are concerns that the huge fiscal deficit disease may even spread to Italy and Belgium. The Eurozone is not all about Germany and France, it is a combination of nations unified by a common currency. The balance sheet of each of the nations must be strong for the euro to give the US dollar some sort of challenge. The US dollar is the currency of a single nation and not a combination of nations therefore it has now become even more difficult to find a replacement of the greenback as the world's reserve currency. I believe gold is the only contender. In 2008 we had the so called too big to fail banks and large corporations falling like a structure made of sand. Now in 2010 we have nations falling in the same way. All the central banks across the world in a unified action can suppress the facts temporarily over their failed balance sheets. But when the same gets leaked later the aftermaths will be even bitter and unmanageable. Gold will be best investment alternative in such a scenario.
However a word of caution? Gold is showing increasing signs of “paperisation” in the short term and medium term. There is an increase in physically backed gold exchange traded funds. The number of these funds are rising globally with the passing of each month. As and when there is a reduction in global liquidity or there are other attractive short term investment avenues gold gets sold off. The sell off in gold due to the above factors is “paperisation” of gold and nothing else.
There are a lot of concerns that the European central bank (ECB) may delay the withdrawal of stimulus measures after Greece fiasco. In my view they should not do the same as it will give wrong signals over the sustainability of the euro as a currency in the longer term.
WILL COMMODITES BE CONTINUED TO BE LINKED TO THE US DOLLAR?
Over the years there has been a more or less inverse correlation between the US dollar and commodity prices. After the euro’s current fiasco the US dollar will continue to gain on an overall basis for the rest of 2010. One thing which haunts me is whether commodities will continue to be linked to the US dollar. In my view higher growth in emerging markets and higher global liquidity will result in continued investment demand in commodities in the medium term to long term. In the short term yes the US dollar will impact commodities. Supply side pressures will prevent commodities from falling in the way they fell in 2008 and in the first quarter of 2009. US economic growth will be the highest among the developed nation in 2010 and 2011. Higher demand from Emerging markets + Higher demand from US and other developed nationsà Supply side pressures à Greater investment demand in commodities à Long term delinking of commodities from the US dollar.
However the risk to the above view is a slowdown in emerging markets particularly China and India. Investors should keep in mind that in the long term fundamentals are important while in the short term its all about liquidity factors for commodities.
SILVER LONG TERM
In my view it is better to remain on the sidelines and buy on sharp dips in gold, copper and crude oil. As far as silver is concerned this silver bull is a bit shaky for the first time over the short term. Long term (12 months to eighteen months) I am very bullish and I recommend silver as the best investment with price targets of $24 and $31. In the Indian rupee term I am looking at minimum Rs.32620/- per kilogram before 30th January 2011 and a maximum of Rs.39740 per kilogram. I do not foresee Indian silver prices falling below Rs.18155 per kilogram under the worst case scenario. The risk to return ration with every fall for the long term silver investor is in favor of the buyer.
TECHNICAL VIEW
COMEX SILVER MARCH
Bullish over $1478 with $1557 and $1610 as price target
Bearish below $1468 with $1428 and $1390 as price target
Neutral Zone between $1468-$1478
Support: $1519-$1508-$1492-$1466 and $1392
Resistance: $1579-$1612-$1676
DISCLOSURE: NO POSITIONS
THIS IS JUST AN EXCERPT OF THE MAIN REPORT FOR SUBSCRIPTION CALL 919311139549
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
For further clarifications on this report call 91-9312335649 (Mr. Chintan Karnani)
Yahoo chat: chintan342@yahoo.co.in
You can also mail your queries at chintan@insigniaindia.com
-- Posted Tuesday, 9 February 2010 | Digg This Article | Source: GoldSeek.com
