Commodity Trade Mantra

Gold prices will swing amid volatility on Euro-zone & FOMC outcomes.

Gold prices

Gold prices will swing amid volatility on Euro-zone & FOMC outcomes.

Gold prices have been up for the entire week as forecasted for the week & have almost achieved all the given targets. Given for the week, Gold Futures for August delivery till above $1582.30 will rise further to $1606, $1621 & $1648, Gold prices topped at $1635.4 on Friday from $1583 on Monday.

Gold traders are bullish for a fourth consecutive week after hedge funds added to bets that prices will rally, exchange-traded products backed by the metal expanded and Europe’s debt crisis roiled markets. Speculators boosted net-long positions by 27% in the week ended June 5, the latest Commodity Futures Trading Commission data show. ETP holdings rose 21.07 metric tons valued at $1.03 billion since the start of June, halting a three-month retreat. Almost $5.7 trillion was wiped off the value of global equities since the end of March on signs of slowing growth, spurring speculation that policymakers will do more to shore up economies. Gold rose about 70% as the Federal Reserve bought $2.3 trillion of debt in two rounds of quantitative easing, or QE, ending in June 2012. Whatever the outcome in Europe, it will likely be supportive for gold prices. The possibility of QE3 or monetary easing in some other form in the U.S.would also be good for gold prices.

Central banks are also buying more metal after adding 456.4 tons last year, the most in almost five decades, according to the London-based World Gold Council, which predicts another 400 tons will be added in 2012. They increased their combined reserves for 14 consecutive months through March, the longest streak since 1964. Many countries said to have bought Gold have not actually “Bought Gold” but have got rid of US Dollars at the high levels seen currently & to diversify because gold is liquid and portable.

Fed policy makers meet June 19-20 to review their economic projections & will discuss whether to do more to spur growth. The Federal Reserve Bank of New York’s general economic activity index dropped to 2.3 from 17.1 the prior month. This greatly increases odds in favor of QE3 or other accommodative policies at FOMC meeting next week which can in turn be highly positive for Gold. The Fed announcing some kind of “balance-sheet move” at that meeting are yet about one in three.

The market rally this whole month has been largely predicated on the idea that someone, the Fed or the ECB, or maybe any of them will step into any action.

Fed policy makers meet June 19-20 to review their economic projections & will discuss whether to do more to spur growth. Instead of an outright quantitative easing program – a QE3 now, the Fed may facilitate stimulus programs such as extending the Operation Twist, which expires this month.

ECB may also opt for a rate cut by at least 25 basis points to a max of 50 BPS in its July meet.

Day Trading in most commodities in the week, especially Friday was directionless as alerted. Stops to the upside and downside have been triggered within very short time frames amid market nervousness ahead of the Greek election result and as the pending FOMC decision next week intensifies. Volumes have been low and moves seemed completely random as the market moved from highs to lows to highs.

Our view: Greece may end up in a deadlock again.

Whatever the outcome: Simple Gold Trading strategy for the week amid extreme Volatility.

There is a plethora of news & forecasts all over regardingGreece,Spain,Italy, the Euro-zone in general & the FOMC,UK, etc, but nowhere do you find some advice to cope up with this crisis. Most would advice to remain on the sidelines, watch & wait for the opportunity to enter when clarity arrives. But generally the opportunity will vanish by the time the clarity is seen.

Why worry of what may happen when you cannot change anything to help or be stressed regarding the outcome of a crisis beyond your control? The best solution is to be prepared for the Good & also the worst with strategic positioning to gain from whatever be the outcome.

Gold prices may most probably decline along with the Euro & then rise when FOMC declares some easing.

As also alerted earlier- the next week starting 18 June could set the tone for further direction in Gold prices. Only a break in Gold Aug Prices with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747 & $1783 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness.

On any negative news for Gold prices, sharp corrections, on momentum below $1621 to the very strong $1540 levels cannot be ruled out. Traders should now keep GTD Buy triggers (to add more volumes) above $1652.50 for upside targets as given & maintain current balance buy positions with GTC Sell triggers in Double the volumes (to exit current buy positions & also enter sell trades) as currently held below $1621 for targets of $1594, $1570 & $1540.

Silver July Futures above $28.09 will rise to $28.72, $29.08, $29.53 & on a break above $29.80 to $31.60. A decline below $28 could trigger weekly declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.

Sustained momentum in Silver above $32.05 will trigger Bullishness & then rises to $33.85, $36.10 & $37.54 may also be seen.  The level of $34.30 is now crucial in Silver for further yearly Bullishness.

In case of a win by the pro-bailout party in Greece & may be added with some form of monetary easing by the US Fed, Gold may rise along with the Euro but commodities like Silver, Copper & other metals may sharply rise. China has already announced a rate cut & the RBI is also expected to announce a rate cut next week.

Our View & Forecast:

Gold would continue be a likely beneficiary from the ever increasing probabilities of never ending additional monetary easing and a disruptive political climate from all around the Globe.

Central-bank representatives look for continued (Emergency Surgery) loose monetary policy around the world, particularly in the U.S. and Europe. Nations returning soon for more easing like Italy, Spain, Greece, The U.S., etc are clear examples that Monetary easing has not provided for the longer term benefit but has only proven to be an immediate relief provider- A Pain killer capsule & not a permanent cure to the problem.

How much longer are Governments & Central Bankers going to take to understand the implications of these temporary painkillers?

All the bailouts eventually have to be paid up & by whom? The Taxpayers!

There is hope & optimism all around immediately after some easing is granted but eventually all that fades away & a more fearsome reality hits hard. A time will come when no more monetary easing would be possible without taxing the common man on the street to beyond logical limits. Taxes will be ruthlessly imposed with a view to alleviate the social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate. The impositions of more and more taxes will finally trigger large & violent revolutions. There will also be large waves of crimes triggered by the hard times.

Large scale revolutions will surely be seen in almost all parts of the world but especially in the so-called developed nations. 2013 is the year when the pain really kicks in. The need for a transformation of existing state, business and banking structures will be strong, but nobody is going to use democratic methods to ask anybody for their point of view. There will be corruption and eventually the rooting out of corruption.

Emergency surgery (Bail outs) methods for immediate relief but ending up in spiraling debt due to repeat requirements of more monetary bailouts will prove to be the undoing for many governments.

The U.S.$ will also witness an extremely Massive downfall, contradictory to the extraordinary rises seen recently.

The insensitivity of nations towards FOOD Shortages will be one of the major sources of unrest in the developing world in the coming period. Epidemics may soon follow in large waves.

 Putting food on the table will be a more pressing concern than buying luxuries or gifts. Inflation & scarcity of food will be severely felt.

The million $ question thus answered now: Do you now invest in Gold or in Food due to the expected shortages & inflation? Can Gold rise further when there will be so much of gloom & despair & so little to invest in terms of money and also in terms of interest when so much of negativity is going around. Gold will actually be sold (re-cycled) to overcome fiscal burdens & also for immediate liquidity to support life. And so the outlook that, Gold and silver inflows may increase from 2012 end or 2013 onward when there is absolute chaos. Till then Gold will remain on a majorly one way street called “Rise”.

The awareness of the suffering of the underprivileged has scarcely begun. What we will see over the next few years is the extreme polarization of right-wing solutions. Finally by 2024, there will be little that remains of the autocratic structures that are currently being put in place to safeguard the banks and corporations whose survival is currently threatened.

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