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Asian Metals Market Update: Jan-3-2017

By: Chintan Karnani, Insignia Consultants

 -- Published: Tuesday, 3 January 2017 | Print  | Disqus 

Last year precious metals and industrial metals had been shared between bulls and bears. In the first half of last year, precious metals zoomed, while in the second half of the year industrial metals and natural gas zoomed. Over the past two years, there have been very gloomy predictions on gold and silver all over the internet. None of the extreme bearish forecast actually came. The message for 2017 is very clear, one needs to trade on a combination of information and technical. Balance on trading strategy as well as balance of mind on which way metals and energies may move on any day will be the key.


Bitcoin is now turning out to be an asset class. It reached $1000 for the first time. Firmness in Bitcoin prices will attract a lot of investment from equities as well as commodities. Silver and gold could get serious competition from bitcoin in the short term unless bearish fundamentals make a U turn.


The period till 20th January could be very tricky to trade as well as invest. Obama is trying his best to ensure that his incumbent Trump is not able to implement his election promises. The next nearly three weeks is anything can happen zone. Once Trump becomes the US president, expectation on implementing announced policies will be the key. After Trump’s win, the US dollar has gained significantly against the Japanese Yen and other major currencies. I have my doubts that the US dollar will be able to maintain the pace of gains of 2016. Any US dollar weakness can result in gold and silver prices getting a short term boost.


The Federal Reserve is expected to increase interest rates by three times this year. Jobs creation will be the key. A jobless interest rate hike by the Federal Reserve will be short term gains for the greenback but long term pains for the US dollar. I am not sure whether energy induced inflation will affect the Federal Reserve’s interest rate decisions.


France and Germany face elections this year. The UK will negotiate with the European Union over Brexit. Terrorism will continue to affect Europe. It depends how the leaders will act against terror. Financial markets ignored terrorism last year. I am not sure whether gold and silver will get back the lost safe haven status. Sentiment for the euro and cable is hyper bearish for this year. I prefer to buy far dated call options as a hedge against hyper bearish sentiment.


The Japanese Yen has been very volatile against the US dollar last year. Usd/jpy has a long term resistance at 128 with long term support around the two hundred month moving average of 105.90. Usd/jpy can fall to 105.90 and 96.90 in case it does break 128 by June. The Yen will be dictated more by global sentiment of the US dollar and less by Japanese internal policies. Risk to Yen is change in political leadership.


As far as India is concerned, instead of watching and reading the paid Indian media, it is better to assess the real unemployment situation by visiting small towns, semi-urban cities and villages. The job situation in India under the British rule was way better than imposed demonetization. Political parties will not take any serious campaigns as their cash has been converted into new currencies without any hassles. (I am not against demonetization. The way demonetization has been implemented, I feel I am also a culprit as I have voted for the BJP ever since I have been eligible to vote.)


US December private ADP numbers and US December nonfarm payrolls will be the key. NFP below 180,000 can trigger a short term US dollar sell off.



COMEX GOLD FEBRUARY 2017 – current price $1155.95

Bullish over $1144.80 with $1159.20 and $1178.90 as price target

Bearish below $1135.90 with $1119.10 and $1111.20 as price target.

Neutral Zone between: $1135.90-$1144.80

  • Gold can rise to $1191.70 this week as long as it trades over $1135-$1148 zone.
  • There will be another wave of rise if gold manages to trade over $1158.
  • Bearish trend will be there only if gold has a daily close below $1135 on Friday.

MCX GOLD FEBRUARY 2017 – previous day close Rs.27570.

Gold targets hundred week moving average of 27909 and 28277 as long as it trades over 27360. Bearish trend will be there if (a) Gold does not break 27909 by Friday (b) Gold trades below 27360.

(prices in Indian Rupees above)

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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