-- Posted Monday, 11 October 2010 | Digg This Article
| | Source: GoldSeek.com
GENERAL MARKET CONDITIONS/FUNDAMENTAL FACTOR
Leaders of the world economy failed to narrow differences over currencies as they turned to the International Monetary Fund to calm frictions that are already sparking protectionism. Exchange rates dominated the IMF’s annual meeting in Washington on concern that officials are relying on cheaper currencies to aid growth, risking retaliatory devaluations and trade barriers. China was accused of undervaluing the yuan, while low interest rates in the U.S. and other rich nations were blamed for flooding emerging markets with capital. Gold and other commodities have risen and the US dollar has weakened as result of the same.
Currency wars have started and it just the beginning which can go anywhere. The earlier G7 nation’s (France, UK. Japan and Eurozone) all want to use currency moves to spruce up their economy. The USA is resorting to indirect dollar depreciation for an export lead recovery, Japan has started intervening to prevent the yen from appreciating further and to help Japanese exports. The Eurozone wants to prevent the euro from rapid sharp gains as a stronger euro has started affecting exports. Basically every nation wants an export led recovery which will create tussle among nations. Since 2000 most of the central bankers have taken unified action to spruce global economic growth. After the current currency market fiasco days of unified action by central banks are over. It’s time for unilateral actions among central banks. Gold and other safe havens will be the beneficiary of the same.
The western nations and western politicians used military might to show their defense capabilities. USA invaded Vietnam, Iraq and Afghanistan just to showcase their military might which resulted in a higher budget deficit. The USA supplies F-16’s to Pakistan so that India buys its F18 hornets. This is what USA is resorting to by promoting arms race in the world. The United States and India are working on a $4.4 billion deal for the Indian Air Force to acquire ten C-17 Globemaster transport aircraft ahead of President Barack Obama's visit to India. This $4.4 billion deal could create up to 30,000 jobs in the US and would be particularly important for Southern California as the assembly line for these colossal aircrafts is located in Long Beach. Creating an arms race boosts defense exports and will also create jobs in the USA. This is what the USA and other key defense exporting nations are resorting to. On one hand they say they want the globe to be peaceful while on other hand they have created an arms race. India, Pakistan and China will never be at peace with other each other because the western nations will never want them to be. The end result is a continuation of the global arms race and gold and only gold will rise. I expect big asset bubbles which will be uncontrollable; there will be total break down of currencies with gold as the only savior.
Side effects of eurozone austerity measures
Portuguese Prime Minister Jose Socrates will face the country’s first joint general strike in 22 years as the two biggest labor organizations prepare to protest against the government’s austerity measures. The UGT and CGTP groups agreed to call a general strike for Nov. 24, a date proposed by CGTP on Oct. 1. The last general strike by both labor organizations was in 1988. CGTP called a general strike without UGT in 2007.
Our View: This is the effect of austerity measures which Portugal has started and has the potential to spread to other nations in eurozone. If the prudent fiscal measures are not implemented on a sustained way in the long run then the euro as a currency could boomerang once again.
Technically oversold conditions exist but the momentum is still bullish.
TECHNICAL VIEW
COMEX GOLD DECEMBER
Bullish over $1339.50 with $1371 and $1380.50 as price target
Bearish below $1330.30 with $1319 and $1288 as price target
Neutral Zone between $1330.30-$1339.50
Gold targets $1371 and $1409 as long as it trades over $1330
MCX COPPER NOVEMBER
Copper targets INR 375 and INR 381.30 as long as it trades over INR 365.20.
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 Monday, 11 October 2010 | Digg This Article | Source: GoldSeek.com
