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Asian Metals Market Update

By: Chintan Karnani, Insignia Consultants

 -- Published: Monday, 9 June 2014 | Print  | Disqus 

Speculative money will move into betting for the soccer world cup. Soccer world cup is a global betting extravaganza and nothing else to me. Let’s see who replaces the octopus this time. There are huge short positions in gold and silver for now. There can be short covering in gold and silver before the soccer world cup as well as the FOMC meeting. As a result there can be a short spurt in gold and silver. I keep my fingers crossed.

US May employment numbers suggest that interest rates in the USA could rise faster than markets expect. However if the Federal Reserve follows the bank of England, then there will be a very long time period gap between end of taper and official interest rates to rise. The Bank of England has stopped issuing future guidance on interest rates and I just hope that Yellen does not follow Carney. The longer the time gap between tapering and an official rise in interest rates, the chances of a short term spurt in gold and silver prices will be very high.

Now where is gold and silver headed?

Society generale says that gold prices will fall to $850 by 2016-2017.  What can cause the gold collapse?  My logic is very simple. The USA and its NATO allies will want emerging nations central banks to sell their accumulated gold (between 2003 and 2013). They will do so only when gold prices are below $900 for quite a long term period of time. NATO will try to ensure that gold prices remain below $900 and emerging market nations are forced to sell their gold. This gold will be converted either into US dollars or into the euro. Future Russian leadership and Chinese leadership hold the key to gold demand by central banks. I believe that India under Shri Narendra Modi leadership will increase India’s gold reserves further. Russian and Chinese central banks are key buyers of gold. (apart from Russia, China and India most of the global central banks could either be selling gold directly or the Ecuador way due to lack of options). Anti US leadership will be the key to gold prices in the long term. Long term here implies ten years and more.

In the next five years, physical demand for gold will be the key. Asians are the largest buyers of physical gold and their demand will be the key. Investors are reducing their investment in gold exchange traded funds and other forms. This trend will continue until at least 2015. The big Bull Run in gold to $2250 and/or $5000 will come if India has a sustained GDP growth of over six percent and simultaneously Chinese GDP growth clocks eight percent and over. I believe that India and Chinese demand are the key for gold prices in an era where suppression of gold prices is subservient. It is only strong fundamentals which can force investors to reinvest in gold.

Silver investors investing in silver for a period of five years need not worry. The earth is seriously getting affected by warming. Silver is the best metal to control global warming due to its varied uses as an anti-pollutant. The risk to long term silver prices is new cheaper substitutes to fight global warming.

Long term technical: Gold: (a) For a another big sell off, in case gold does not break $1400 for the rest of the year then a fall to $1146 and $980 could be possible (b) Gold bulls hope that gold is able to trade over $1046 in the next twelve months in order wear down short sellers.

Interest rate direction in the USA and Europe will be the key. The UK should have raised interest rates. Central banks have a tendency of supporting asset bubbles. I hope the UK does not fall prey to an asset bubble in the next three years. Societe Generale key reason for fall in gold prices is higher US interest rates. I have my doubts whether the inverse correlation between gold prices and interest rate will continue in the long term. Only bitcoins and other electronic currencies will affect performance of gold. We now live in a virtual world and we cannot ignore virtual currencies.


There are no major US economic data releases till Wednesday. It will be a technical trade. Thursday’s US may retail sale numbers will be the key and will set the trend for the US dollar and bullion till the FOMC meet on 18th.

This week gold needs to fall below $1225 or break $1279 for direction. Silver needs to fall below $1854 for another collapse.


COMEX GOLD AUGUST 2014 – current price $1253.20

Bullish over $1243.00 with $1264.00 and $1282.00 price target

Bearish below $1229.00 with $1219.00 and $1208.00 as price target

Neutral Zone between $1229 and $1243

  • Gold needs to trade over $1242 to target $1269-$1279
  • Better to remain on the sidelines today
  • There will be another wave of selling only if gold falls below $1239

COMEX SILVER JULY 2014 – current price $1901.50

Bullish over $1892 with $1926 and $1976 as price target

Bearish below $1871 with $1854-$1830 as price target

Neutral Zone between: $1892-$1871

  • Silver needs to trade over $1890 to target $1926-$1954
  • Silver will track copper and gold
  • Remain on the sidelines

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

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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UK session starts around 1:30 pm Indian Standard Time (+5:30 GMT) -- after the release of LME daily inventories

US session starts at 6pm pm Indian Standard Time (+5:30 GMT)




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