Gold Futures seem to have successfully broken the range bound trend with a sustained upside momentum, ending the week on a high note. Silver & Base metals show better promise of sustaining this rally. Commodity Markets end the week with massive gains in practically all Commodities, Especially more so in Gold & Silver. Gold Futures move over $1,650 grabbed the attention of traders as this was the ceiling of the trading range that Gold Futures were stuck in since May 2012. Comex Gold Futures remain strong till above $1657 with a focus towards $1679.5, $1688.5 & $1702. Comex Silver Futures remain strong till above $30.25 with a focus towards $30.91, $31.36, $31.96 & $32.50.
Gold Futures may remain Highly Volatile on a Dicey Long Weekend:
Short position covering in Gold Futures may trigger further volatile upsides. Comex Gold Futures for October delivery trading with thin volumes may also keep market movements volatile. After pushing through resistance at the $1,650 an ounce level, basis the December Gold Futures at the Comex division of the New York Mercantile Exchange see Gold Futures Prices building on the gains. Gold Futures Prices might try to hold a firmer tone ahead of the Federal Reserve confab next week in Jackson Hole, as Gold bulls hope Fed Chairman Ben Bernanke will tip his hand to show if there is any timeframe for possible stimulus. The Federal Reserve’s meeting next week will be under intense scrutiny by the Gold Trading Markets after minutes from this month’s Federal Open Market Committee meeting showed the Fed inching closer to possible quantitative easing. Precious metals sector in the Commodity Markets rallied after the FOMC minutes were announced. Market participants took that as a sign that a third round of quantitative easing may finally be arriving. Momentum and technicals are clearly in favor of Silver & Gold Futures. The Big Gold Futures Momentum Players are yet to enter in a substantial quantum. The real Commodity Markets Big Bullion play will come in only then. Potential for labor problems in South Africa to spread are likely to keep Platinum group metals on edge.
If the Fed does not give any hint or clarity on further easing (QE3) next Friday in the coming week, Gold Futures Prices may sharply correct, but downside momentum may remain short lived since Gold Futures October contract (short positions) shifting to December contracts may provide the necessary support, especially as there are some significant short positions still being unwound in many of these markets. There is such a risk since some U.S. economic data has been better than expected lately (on successful window dressing before the coming Presidential Elections). Economic data leading up to the upcoming September FOMC meeting will determine what the Fed actually does. As such, caution is the order of the day for the next few weeks. There can be fireworks in Gold Futures Prices on the weekend as Bernanke’s speech next Friday comes on 31 Aug (which is a contract closing day) with a long weekend holiday for the U.S. markets – Labor Day on Monday 3 Sep. Possibility of QE3 will keep the US dollar under pressure for now, especially with sentiment towards Europe expected to hold up at least until early September. Comex Silver Futures for September delivery entering contract closing week may also keep market movements extremely volatile, as short covering in large upside movements, may trigger further forced buying.
Gold ETFs yesterday expanded their holdings to a new record high of 2,447 tons, while Silver ETFs also report further inflows. At 18,164 tons, their holdings are currently at their highest level since May 2011. The exception is palladium, with Bloomberg data showing such ETFs have seen outflows some 23,000 ounces so far in August. Read More – Gold Prices Gain on Revival of QE3 Expectations.
Base Metals Rally Lacks Fundamental Support:
Over all, Commodity Markets may witness Bullishness in most sectors. Base Metals have risen despite a softer Chinese economy, reflecting a view that weak data will trigger a more aggressive policy response. Base Metals & Precious Metals have ended the week on a high note & can be expected to ride the wave higher on expected monetary easing from China, Europe & the US. Commodity Market movements can also be highly volatile due to the coming contract expiries by the weekend. The PBOC – People’s Bank of China is expected to reduce bank reserve requirements and interest rates, with the government likely to implement fiscal policies to boost economic growth. However, until actual global stimulus expectations are converted to reality & with China slowing and North American and European demand yet to pick up from its summer lull, the current Base Metals rally looks rather fragile and lacking in fundamental support.
MCX Silver Prices climbed today to Rs. 57,549 from yesterday’s low of Rs. 56,389. MCX Gold Futures Prices shot up to a new record in Indian Markets to Rs. 30,955 from yesterday’s low of Rs. 30,730. Both have closed around the weeks high showing signs of a Bullish opening next week.