-- Posted Tuesday, 24 August 2010 | Digg This Article
| | Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
Summer Trading comes to an end
The US summer trading is coming to an end. This summer has been accompanied by (1) higher stock markets, the US dollar gaining but paring some of its gains against the euro and other currencies. The rise in German GDP to record levels has supported euro and may continue to do so for some more time. (2) Eurozone disintegration theme has been sent of trash for the time as Greece and other nations implement austerity measures. But in the longer term may be in the second half of 2011, the eurozone disintegration theme should come and once again haunt investors. Long term investors should be prepared for the same. Differential GDP growth among Eurozone nations, Germany alone supporting and lifting eurozone growth and Austerity measures not being implemented successfully on the long term by high debt eurozone nations will act as a drag to euro as a currency. (3) There are concerns that nations where growth can fall will have a fresh wave of job cutting by companies. I do not subscribe to this view at the moment. We need some more evidence for the same. Economic numbers point to a mild slowdown in the US but these are a part and parcel of a growth cycle. If we get some real big layoff news over the coming months then only I will be convinced of a slowdown. (4) The Gulf of Mexico oil spill will have an impact on US economy and will also reduce chances of Democrats getting votes in Southern affected states in the US November State elections. There seems to be a bit of a cover up in the Obama administration over the amount of actual crude oil spilled and crude oil dispersed. (5) Russian wild fires destroying forest, affecting crop production and putting Russia nearly three hundred years back in forest resources can result in higher global inflation as wheat and other food crops prices continue to rise. We know the damage has been extensive in Russia. Central banks may ignore food price inflation but this will benefit gold in the medium term to long term. (6) Extreme weather conditions were witnessed in different parts of the globe with floods in Pakistan and India eastern part getting very low rains while western Indian getting adequate rains. There is no Drought in India.
What next after summer for the rest of the year.
1) The key theme will be the US state elections in November. It seems Mr. Obama has lost his charisma among the US public. He and his team have not been able to deal with issues like the Gulf oil spill and other environmental issues, jobs creation, Afghanistan, Iraq and other places where US troops are stationed. The leaking of the Afghan strategy papers is a big black spot in Obama administration regime. The financial reforms bill has been passed but it’s more of a window dressing which will continue to create asset bubbles and will also result in higher state control of financial markets. The financial markets could be loosing independence under Mr. Obama. Nobody likes day to day interference whether it’s financial markets or personal life or employment. The only way for Mr. Obama and democrats to get some votes is fudge all incoming economic data till the US state elections and ensure that US stock markets continue to be in a bull trend till the elections among other measures.
2) Global economic growth: It remains to be seen whether there is a double dip recession or not. If the global economy recovers then gold will fall and vice- versa.
3) The US dollar; So far so good for the US dollar against the euro and yen. There are expectations that bank of Japan may intervene to stem the yen from further gains. Any intervention by the bank of Japan in the currency markets will be negative for gold.
4) Eurozone: The rating downgrade game by various rating agencies is over this summer and austerity measures are the key for the rest of the year. If austerity measures fail and/or there is lack of implementation for the same then euro/usd can fall to 1.1000 and below and gold rising to $1450.
5) Interest rates are expected to remain at the current levels but global liquidity levels will be dependent on growth which if it falls can result in more liquidity creation measures and higher gold and base metals prices and lower stocks. However emerging market economy stocks are expected to continue to maintain the bull run with corrections nothing but an investment opportunity.
6) Inflation even if it rises will be ignored by central banks in favor of growth.
7) The US housing market will need to be closely watched and any sustained increase in the foreclosure rate can result in stocks crashing, base metals crashing, crude oil falling to $57 and gold rising to $1500.
COMEX TECHNICAL VIEW
COMEX GOLD DECEMBER
Bullish over $1219.00 with $1229.00 and $1239.00 as price target
Bearish below $1211.00 with $1197.00 and $1184.00 as price target
Neutral Zone between $1211-$1219
Gold needs to trade over $1219 for the whole day else it will fall to $1211 and $1197
MCX GOLD OCTOBER
Failure to break INR 18875 by tomorrow will result in a fall to INR 18500 and INR 18350
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 Tuesday, 24 August 2010 | Digg This Article | Source: GoldSeek.com
