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Asian Metals Market Update: Jan-10-2017

By: Chintan Karnani, Insignia Consultants

 -- Published: Tuesday, 10 January 2017 | Print  | Disqus 

The US dollar’s fall is profit taking before Trump’s swearing in which if it continues till Thursday can result in a technical breakdown. Weakness in the US dollar resulted in the rise of gold, silver and industrial metals. Crude oil fell as traders assessed supply side pressures for the rest of the quarter. Natural gas also had a technical knock down.


Price moves in metals and energies are due to position squaring and rebuilding before Trump takes over as US president. There is some section of the investment community which believes that pre-election promises implementation will not be easy for Trump. There may not be a massive boost to jobs growth. The pace of interest rate hikes by the Federal Reserve will be slower. This group is long gold and short dollar with hedges in the option market to protect against a failed investment strategy.


However most of the investors are betting on higher US growth, higher US inflation and stable to higher US jobs growth and the multiplier effect in the form of quicker pace of interest rate hikes. In my view in the first half of year, optimism over Trump and the US economy will prevail. In the second half of the year (after June), this optimism could pave the way for reality and pessimism. The second half of the year should be a sun shine time for gold and silver bulls and greenback bears.


China is preparing to lower the corporate tax rate should Trump also cut the American corporate tax rate. The Chinese are prepared for the corporate tax battle with Americans to ensure its supremacy on manufacturing. Chinese domestic demand may have formed a long term bottom as reforms of the past few years trickle down to every strata of the society. Higher Chinese domestic demand will result in rising Chinese demand for gold and silver which should limit big price crashes.


The next three days are very crucial for gold, silver and crude oil. If gold and silver rise and have a higher daily close, then $1220 and $1860 could be the short term targets. Crude oil on the other hand needs to prevent it from having a daily close below $51.60 for the next three days to prevent it from falling to $46.70 and $42.20.


COMEX SILVER MARCH 2017 – current price $1661.70

Bullish over $1634 with $1677 and $1703 as price target

Bearish below $1617 with $1585 and $1566 as price target

Neutral Zone between: $1617-$1634

·         Silver has another chance to rise to $1700-$1730 zone as long as it trades over $1630

·         Silver has disappointed in the past. One should be cautious despite the bullish trend.

MCX SILVER MARCH 2017 –previous day close Rs.40688

The broader trading range is 39843-40736-41375. One need not get overtly bullish on silver due to disappointing bullish track record over the past two years. There will be sell only if silver trades below 39843 or case silver does not break 41375 by Thursday. At current prices silver is technically mildly bullish. Jobbers watch 40678 all the time

(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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