-- Posted Thursday, 27 May 2010 | Digg This Article
| | Source: GoldSeek.com
One bad news story after another comes for the stock markets as speculation that China may review investments in European government bonds spurred concern the credit crisis will worsen. Federal Reserve Bank of Richmond President Jeffrey Lacker said Europe’s sovereign debt crisis may reduce U.S. economic growth by as much as 0.2%. Italy has joined Spain and Portugal in spending cuts and reduce fiscal deficit as a means to convince the markets that something concrete is being done and the euro stabilizes.
Effect of Foreign Exchange reserve diversification away from Euro’s by central banks
Global central bank reserves stand at $7,500bn, according to the latest data from the International Monetary Fund. This is a record high, up from $2,000bn at the start of the last decade. The reserves are concentrated in Asia and oil-producing countries, with nearly 60 per cent of the total held by just six nations: China, Japan, Russia, South Korea, India and Taiwan. China is by far the world’s largest holder of foreign exchange reserves, with $2,400bn in its stockpiles. According to the IMF, central banks around the world keep about 60 per cent of their reserve holdings in dollars, 31 per cent in euros, 5 per cent in sterling and the rest in other currencies, including the yen, Swiss franc and Canadian and Australian dollars.
If even ten percent of the thirty one percent of euro holdings gets diversified away from the US dollar the euro could crash further and fall below parity over the coming months. Central banks increasing their euro reserves has been one of the prime reason for the euro’s rise over the past decade. I am very sure gold will get a higher allocation in foreign exchange reserve diversification away from the euro by central banks. Even if one percent of thirty percent goes into gold, gold can easily rise to $2000 and above.
COMEX TECHNICAL VIEW
COMEX COPPER JULY
Bearish below $306 with $301 and $296 as price target
Bullish over $312.10 with $318 and $324 as price target
Neutral Zone between: $306-$312.10
Failure to break and close over $312 by tomorrow will result in a fall to $301 and $292.
MCX CRUDE OIL (JUNE) – Short term view
One needs to wait and watch crude for a week and invest in far dated futures on dips. I do not expect crude oil prices to fall below Rs.2750 over the next three months with every possibility of Rs.3800+ being re tested.
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
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-- Posted Thursday, 27 May 2010 | Digg This Article | Source: GoldSeek.com
