Gold Prices weakened to the lowest in over a month as investor holdings slid the most in two weeks & also on speculation that physical Gold Demand will slow during this week’s Lunar New Year holiday in China. Lael Brainard, the U.S. Treasury’s undersecretary for international affairs said Group of 20 nations must avoid Currency devaluations. The G-20 needs to refrain from competitive devaluations and promote transparency in exchange rates, he said. Gold ETP assets fell 0.14% to 2,611.41 metric tons yesterday, the biggest decline since Jan 24th, according to data compiled by Bloomberg. The absence of the Chinese market players this week means thinner volumes & price volatility is at its highest at such times. Price manipulation by vested interests plays an important role during such times. Gold Prices also fell as ministers from the 17-member euro area met in Brussels to discuss a possible bailout for Cyprus as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region’s debt crisis. This seems as an opportune time to get long in Gold and Silver as both close in on important support levels. Comex Gold Futures for Apr delivery slumped to $1644.1 before closing at $1649.1 whereas Comex Silver weakened over 1.7% to $30.82 & closed nearby at $30.91. The decline in Gold Prices yesterday was exaggerated & have a reasonable support around $1643.5, which if breached can lead to a very strong support at $1621. Comex Silver Prices for Mar Futures have strong support at $30 & an even solid one at $29.20. Bottom fishing is surely expected at dips to these levels & upside price movements may be seen sooner than expected. Thin volumes due to lack of the full pack of market players is the major reason why quantum buying support is not being seen on sharp declines in Silver and Gold Prices. The correlation of Gold Price with EUR/USD has been in an On & Off mode lately, meaning there has been a decoupling between the both while Euro has been rising but is linked on the decline. Gold Prices have not managed to benefit much from the Euro’s strong rally against the US Dollar from late January but the recent Euro weakness has had a weakening effect on Gold Prices
Declines in Silver and Gold Prices may be capped as North Korea conducted its third nuclear test today, boosting demand for bullion as a safe haven. North Korea conducted its third nuclear test today in defiance of U.N. resolutions, angering the United States and Japan, and likely to infuriate its only major ally, China, and increase penalties against Pyongyang. North Korea detonated an atomic bomb with high explosive capability, the official Korean Central News Agency reported today. The North said the test had “greater explosive force” than the 2006 and 2009 tests that were widely seen as small-scale. Its KCNA news agency said it had used a “miniaturized” and lighter nuclear device, indicating that it had again used plutonium which is more suitable for use as a missile warhead. US President Barack Obama said the test was a “highly provocative act” that hurt stability in the region and called its nuclear program a threat to U.S.and international security. Japanese Prime Minister Shinzo Abe said the test was a “grave threat” that could not be tolerated. Japan immediately called for more sanctions against North Korea and South Korea’s defense ministry said additional nuclear tests and rocket launches by the North should not be ruled out. U.N. Secretary-General Ban Ki-moon said the test was a “clear and grave violation” of U.N. Security Council resolutions. South Korea said the size of the seismic activity indicated a nuclear explosion slightly larger than the North’s two previous tests at 6-7 kilotons, although that is still relatively small. The Hiroshima bomb was around 20 kilotons. The U.S. Geological Survey said that a seismic event measuring 5.1 in magnitude had occurred on Tuesday, with North Korea later confirming the nuclear test. The test prompted the U.N. Security Council to call for an emergency meeting later on Tuesday. It is likely to be a major embarrassment for Beijing, the North’s sole major economic and diplomatic ally. “The test is hugely insulting to China, which now can be expected to follow through with threats to impose sanctions,” said Mark Fitzpatrick of the International Institute for Strategic Studies think tank. MCX Gold Futures fell 0.3% to 30,553 Rupees per 10 grams ($1,764.48 an ounce) on the Multi Commodity Exchange of India Ltd. Markets in Hong Kong, China, Singapore, Malaysia and Taiwan are closed for Lunar New Year holidays today. Gold Prices have declined 1.7% till now this year as Silver Prices advanced 1.8% and Platinum Prices climbed 10%. at today’s Gold Prices, one ounce of Gold bought as many as 53.4695 ounces of Silver today, the most since Jan. 29, data compiled by Bloomberg show.
There is growing concern that the so-called Currency Wars could break out on a full fledged scale if some form of agreement is not reached soon by the major nations participating in these wars. At present, Japan is seen as the major instigator as its Yen continues southbound journey & plummets in value. Venezuela devalued its currency – the Bolivar for the fifth time in nine years. Venezuela took a gigantic step in a massive 45% currency devaluation, re-pegging it’s currency to a value of 6.3 / US Dollar from its previous official exchange rate of 4.3 / Dollar. This marks the entry of one more nation into the soon heating up & so-called Currency Wars where many countries are competing towards the bottom in order to increase their export competitiveness. Reports during the weekend said the U.S.and European Union finance officials are considering issuing a joint statement on the matter, designed to ease growing worries and to send a warning to other countries. If the major countries cannot come to meaningful agreement on the matter and continue to work to devalue their currencies, that could become a major bullish force for Gold Prices, which is viewed by many traders and investors worldwide as a safe-haven “hard currency.” The G7 summit could grab attention from Gold and Silver Market traders as reports have said the participating nations may issue a statement about currency exchange rates & is expected to mention that the G7 countries won’t engage in unilateral currency devaluation.
US Mint sales of Gold Coins this month has been robust on weakened Gold Prices at 34,500 ounces so far & already much above the 21,000 ounces from all of February of 2012. The year-to-date sales of 184,500 ounces of Gold are already more than 148,000 for all of January and February 2012. Sales of American Eagle Silver Coins in Feb so far has been 1,309,000 as compared to 1,490,000 from all of February of 2012.
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