-- Posted Wednesday, 9 October 2013 | | Disqus
In my view the US senate deadlock will be over before the weekend. The economic impact of the shutdown will be the key over the coming few weeks. Tapering by the Federal Reserve, which has been the key theme so far in 2013, will not be heard for the rest of the year. In fact, I have my doubts whether the USA will be able to get out of the zero interest rate spiral. Withdrawal of quantitative easing from $80 billion a month to something lower does not signal higher interest rates. If the Federal Reserve does not raise real interest rates by 0.25% in 2014, it will be caught in the negative effects of a sustained zero interest rate policy.
China and Japan had raised concerns over their US debt investments. Central banks will be forced to diversify their investments of the US dollar. Since 2002, a part of the reason for the gold price was a huge increase in central bank demand. I hope to see a “Central bank foreign exchange reserve diversification two” for now. However incremental increase in gold reserves by central banks will not match 2002-2012 period. Those nations which are less dependent on energy imports or have lower current account deficits will diversify in a bigger way than nations like India which have a huge current account deficit.
The big question now is why gold has not risen despite all the conditions for another big rise. (a) Investors still believe that the US economy and global economy will be able to withstand a short term shutdown of US government. (b) There is uncertainty over a very sharp increase in gold prices. Equities and bond markets still offer some certainty. (c) Middle East peace (Syria and Iran among others) have reduced middle risk premiums in gold. (d) There is slowing demand in China which is now one the largest consumers of gold. (e) Slower emerging market growth has reduced gold demand outlook for the next few quarters.
In my view short term and 2013/early 2014 fall in gold prices should be used to invest for the long term (three years to five years). The percentage of gold investment can be reduced but gold still has to be a part of every long term investment. I will be very happy if gold is able to give an annualized return of over eight percent consistently for the next ten years. If gold is able to give a return of eight percent annualized, I would suggest to invest in it. The reason is that there is still uncertainty of the long term safety of government bonds by various nations. Nations will be able to protect the safety of their bonds for the short term (two years to three years) but in the long term they will not be able to withhold information. In the next five years, there is a big possibility of a debt default by some of the emerging markets. I have always been against gold exchange traded fund investment, if the investment is made for a period of three years and over. I am still against it. Still if one invests in a gold ETF then invest only in gold ETFs which are backed by physical.
COMEX TECHNICAL VIEW
COMEX GOLD DECEMBER 2013 – current price $1319.50
- Gold will break free from $1290-$1360 range anytime soon and form a new range. Day traders and jobbers are on the sidelines.
MCX COPPER NOVEMBER – short term view – prices in Indian rupees below
The all time high is at 512.65 which was there in September 2013. We believe that copper will not be able to break 512.65 in the next six months with every possibility of 421.20 and below.
Copper could consolidate in 439.50-447-465.10-482.30 over the next few months. Only a daily close below 455 for five consecutive days will resume the bearish direction to 421.20.
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 Manan Somani
Disclosure: Insignia consultants or it employees do not have any trading positions on the trading strategies mentioned above. Our clients do have positions on the trading strategies mentioned in the above report.
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NOTES TO THE ABOVE REPORT
PLEASE NOTE: HOLDS MEANS HOLDS ON DAILY CLOSING BASIS
PLEASE USE APPROPRIATE STOP LOSSES ON INTRA DAY TRADES TO LIMIT LOSSES.
APPROPRIATE STOP LOSSES PER LOT IN US DOLLARS ON THE TRADING CALLS GIVEN IN THIS REPORT
COMEX GOLD – $15-$17
COMEX SILVER: $25-$30
COMEX COPPER: $3
NYMEX CRUDE OIL: $0.60
SPOT SILVER: $0.25
SPOT GOLD: $15-$17
THE TIME GIVEN IN THE REPORT IS THE TIME OF COMPLETION OF REPORT
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-- Posted Wednesday, 9 October 2013 | Digg This Article
| Source: GoldSeek.com
