Gold Prices seem hungry for some news to rise and that news needs to be either fresh U.S. Quantitative Easing or a sharp rise in Inflation. Generally robust economic growth causes inflation, which in no certain terms can be expected for the next few years. But with the poor rainfalls & rising heat waves, Rising Food Prices are likely to be the foremost driver of Gold Prices rise in the coming days. Rising un-employment could be the next cause of worry followed by heightened global economic or political turmoil & no end in sight to Europe’s debt woes. I have long since alerted (in mid 2011) of the expected massive Food Inflation Explosion to occur from 2012 onward & by now its no more just around the corner – Its Here & Growing.
With a progressive series of lower highs and higher lows, Gold Prices are tightening the range of its movements. It seems Gold Prices are preparing for a Big move on the first break through on the either side, for the moment. A break below $1,540 on a closing basis may open grounds for Gold Prices to further fall freely to 1441, $1360, $1279 & then possibly to $1180 also, while momentum above $1,652.50 would set Gold Prices up for a break higher & will trigger Bullishness & then rises to $1693, $1747, $1783 & $1819 may also be seen.
Open interest in the Comex Gold futures market has declined to lows last seen just after the 2008 crisis. Most of this decline in open interest has come from the money managers, who now hold very low levels of long contracts relative to the past five years. Mild to low volume activity has been seen in the physical Gold markets, as volumes in China and India (the world’s largest consumers of Gold) hold at subdued levels.
QE3 hopes rise & get tied to every appearance that Fed Chairman Bernanke makes, whether in a Testimony or a Policy meet by the FOMC. Bernanke kept the door to QE3 open but stopped short of providing any clues to the timing of moving in the big announcement. He continued to use past language saying the Federal Open Market Committee (FOMC) stands ready to act, if necessary. Bernanke might be more inclined to indicate a greater inclination for more easing at the Fed’s annual Jackson Hole symposium in late August. U.S. QE3 undoubtedly is an assured event & we expect the Fed to launch a third round of quantitative easing sooner rather than later. Monetary accommodation should in turn take the US dollar lower and inflation expectations higher, both supportive factors for higher Gold Prices.
Gold Prices still on track to post another record-breaking average in 2012, extending its bull run into a twelfth year as ultra-loose monetary policy in key economies keeps interest rates at rock bottom. Gold experts have further cut back price forecasts for the metal this year after a sluggish first half, a quarterly Reuters poll showed on Monday, while gains in the dollar and a dearth of physical demand are likely to clip any attempted return to last September’s record high for the rest of the year.
Silver Prices have been suffering smaller weekly / intraday price swings in the past few weeks than normally seen. Silver Prices suffering from chronic record-high mine supply, weak off take from industrial users in the electronics industry, evaporating demand from the photography sector, and greater caution among speculative investors after two major price slumps last year. With QE3 possible in September, we see definite scope for a massive rebound of Silver Prices along with the entire Base Metals complex also rising handsomely.
Silver Price movement: A decline below $28 could trigger declines to $27.55, $27.10, $26.74 & to a very strong support of $26.20 also.
Downside Risk: Silver will remain Range bound till above $26.20 & below $31.60. A sustained breakthrough below $26.20 on a closing basis may open grounds for Silver to further dip to $24 & any momentum below this would make Silver fall freely to $22.15 & to $19 also.
Upside Potential: Only a break in Silver Prices with sustained momentum above $32.05 will trigger Bullishness & then rises to $34.30, $36.10 & $37.54 may also be seen. The level of $34.30 is now crucial in Silver for further yearly Bullishness & to cruise swiftly to New Highs above the $50 mark.
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