-- Posted Wednesday, 25 August 2010 | Digg This Article
| | Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
Gold and silver rose on the back of US housing woes. Sales of previously owned U.S. homes took a record plunge in July to their slowest pace in 15 years as the wind went out of the housing sector's sails and underlined a struggling economy. I am not convinced whether the US housing market are a barometer to judge US economy but nevertheless they can have an impact on default rates and lower retail consumption. If more bad news from the US economy continues to come in for the rest of the week and in September then gold can easily rise to $1350 by end September. I am serious and not joking. Base metals and energies can fall another ten percent from the current prices on bad fundamentals. But once again a twenty percent fall from the current prices in base metals and energies (if it happens over the coming weeks and September) should be used as a long as term investment opportunity.
Ireland’s long term sovereign credit rating was cut one step from AA- from AA. “The negative outlook reflects our view that a further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government’s ability to meet its medium- term fiscal objectives,” S&P said in a statement. Other rating agencies could soon follow S&P. Sovereign debt default by eurozone members is the key reason for gold to rise in 2010. This news will result continued investment inflows into gold on dips. Investors have now where to invest but in gold if nations near default on their debt. In 2011 balance sheet clean up will them among all countries be it Indian, US, Greece etc. Lower interest rates, excess money supply and lack of alternate sources of investments will always be gold positive.
The US dollar has not fallen that much against the euro and sterling after the US home sales numbers which suggest that investors still prefer the US dollar to the Euro. These are just early signals for things that may come in 2011. Investors will have a dilemma in 2011 of whether to invest in the US dollar or the Euro as neither of them could be safe. Any sustained slowdown in the US economy into the first half of 2011 will be negative for the US dollar. But the eurozone has it own woes of regional growth imbalances which can rupture its currency. If the balance sheet clean up and debt reduction measures by weaker eurozone members such as Greece fails then euro could be in deep shit in 2011. Investors you could be in a dilemma in 2011 of choosing between US dollar and Euro. The end beneficiary will be gold and only gold. Economic numbers manipulation will not get unnoticed in the future.
YEN AND GOLD CORRELATION
Over the past few years there has been an inverse correlation between the Japanese yen against the US dollar and gold. This can be seen from the chart below.
This suggests that there is a very huge Japanese investment in the gold market. Further arbitrage between gold and the yen due to a stronger yen has also added to investment inflows into gold. In our view gold will fall as and when the Japanese yen reverses its direction against the US dollar. Only a medium term to long term change in direction of the usd/jpy will result in gold prices falling. (Assuming global economic fundamentals do not change in a big way from current). Gold investors need to watch the yen carefully.
COMEX TECHNICAL VIEW
COMEX SILVER SEPTEMBER
Bullish over $1825 with $1855 and $1875 as price target
Bearish below $1815 with 1790 and $1765 as price target
Neutral Zone between $1815-$1825
Silver has managed to trade over $1775 and can now needs to break $1875 for $1940. Fresh wave of selling will be there below $1825 only.
COMEX COPPER SEPTEMBER
Bearish below $320 with $316.80 and $309.80 as price target
Bullish over $324.00 with $329 and $337 as price target
Neutral Zone between: $320-$324
There will be a technical breakdown below $320 to $309 and $300. Copper needs to float over $320 to be in bullish zone.
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 Wednesday, 25 August 2010 | Digg This Article | Source: GoldSeek.com
