Monday, June 04, 2012
TIME 08:03 AM IST
ASIAN METALS MARKET UPDATE
· Technically gold. Silver are bullish
· Copper and crude oil are bearish.
· The US dollar will be the key
The rise in gold prices on Friday makes me believe that it should rise to $5000 in the next five years. The key reason is that it is showing signs of a currency among central bankers. Before the advent of euro, most of the global central banks foreign exchange reserves was in US dollars. The US dollar reserves got reduced after the start of euro. But now central bankers have also started to reduce euro portion of foreign exchange reserves and have increased gold reserves in the months of April and May. The central banks dilemma will be to look for ways and means to ensure that the purchasing power of their foreign exchange reserves remains intact and gold is the only undisputed medium of exchange among central banks.
For now markets expect another round of quantitative easing by the Federal Reserve this month after the may non farm payrolls. I am against further liquidity injection by the Federal Reserve, European central bank and bank of England as it will only increase speculation in commodities. It will create another big global bubble which will put us in a long term period of very slow growth and very high inflation. All theories which global central banks are following will be buried and new theories will be written which could be too late. Capacities have been created so incremental capital expenditure will be very less to zero on higher growth. Consumers in developed world will increase their savings rate while in emerging markets consumers will reduce savings and/or increase debt. The central bank chief should now act independently on ways and means to increase retail consumption without any significant rise in liquidity. They should also ensure that prices of essentials food products etc and home rentals stabilize and/or do not rise.
Silver will soon catch with gold. One needs to have the patience. Technically silver and copper are bearish on global economic fundamentals.
It's all about behavior science for gold?
In the month of May there was a huge bearish sentiment for gold all across the net and in the media which resulted in most of the long positions getting squared off. Traders got so scared that they booked loss in their long positions. Now when the long positions got scared off and short positions started getting built there was one $70 rise on the first trading day of June. The end result losses in both long positions and short position. This way they trying to kill gold traders.
The best way to get over the same is to either trade intra day to trade with a long term with a risk appetite of at least $250.
But in India investors never got carried away by the bearish sentiment and have remained invested and even invested more in order to tide over stock market value erosion. A weaker rupee resulted in gold prices breaking past Rs.30000 per ten grams for the first time.
If global stock markets fall further then base metals, silver and crude oil will fall while gold will rise/remain firm on safe haven demand.
Spot Gold: Gold targets $1732 and $1923 (all time high) in short term as long as it trades over $1573.
MCX Gold: MCX Gold targets Rs.33511 in short term as long as it trades over Rs.28700
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.
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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