Comex Silver Prices for September delivery gained good technical strength & shot up for a second day to $29.46 from the day’s low of $28.61. October Comex Gold Prices strengthened, getting a lift from a stronger Euro, up to $1641.5 from an intraday low of $1619.1. MCX Silver Trading saw Silver Prices close around the session high Rs. 55,293 from an intraday low of Rs. 54,315. MCX Gold Trading helped Gold Prices gain up to Rs. 30,335 from a low of Rs. 30,157 for the day. Prices accelerated further as stop losses were triggered, initiating reversal of short positions to Longs or as pre-placed orders activated when certain pivotal chart points are hit. NYMEX Crude Oil rising close to a psychological $100 level & Food / Grain Prices rising to new records did their bit in helping the rise in Gold & Silver Prices as a safe haven resort against Inflation.
Gold & Silver Prices Rally may yet turnout to be News Driven:
India’s festive season Gold imports this year will likely be half of last year’s rate, at close to 250 tons for 2012 & reasons for the demand slump being high gold prices and a poor monsoon season depressing consumer demand but the same seems to have been factored in some time back. Moves by China’s central bank to inject more liquidity into its banking system are also seen as bullish for Gold and Silver, as well as the Base Metals. The U.S. dollar index hit a fresh four-week low after the US$ slumped against a basket of most traded currencies the world over. The Euro has risen as high as $1.2475, its strongest level since July 5. Spanish bond yields fell on a day that the country sold 12- and 18-month T-bills. European investors presently are more confident the European Central Bank will be more aggressive in dealing with and aiding the financially troubled EU countries going forward. Traders and investors in Silver & Gold are also hoping the Fed will soon announce a fresh quantitative easing of monetary policy- QE3. The minutes of the last FOMC meeting are due out today, 22 August & rumors are they could hold some type of hints for further Fed easing, expected soon. Gold & Silver investors & traders do not want to be short in Gold or Silver if there were to be large sized Bailouts amid a full-blown currency crisis. As a result, those who had been short have started to reverse positions.
Developments not Dramatic enough to justify steep surge in Gold or Silver Prices yet:
Historically, Gold & Silver Prices often rise during the time frame from August till Christmas or early in the New Year due to gift-giving holidays around the world, starting with Indian festival celebrations. The trading in Bullions has been in a very small & a tight range since May & so any small breakout seems like a Strongly Bullish Indicator. None of the News & Headlines seen currently have the potential of triggering a sustained Rally in Gold & Silver Prices. In fact the reverse seems to be true. It is not that I am holding any Bearish sentiments regarding Gold & Silver Prices. In fact just a few days ago I was among the first to alert of a larger Price movement in Silver. Read: – Silver Trading Boom Around the Corner. I do strongly expect a Rally in Silver Prices but I would rather keep my Trading & Investment volumes lower & for a shorter time frame until clarity in supportive actions from the Central Banks is not seen, or until a clear Bullish trend appears on the technical charts supported by healthier trading volumes. Open positions in Gold, Silver are close to 3 year lows which in itself a strong indicator of high volatility & range bound swings. Any small quantum of buying or selling can spurt movements amid thin volumes & that should not be taken as a reason for longer term investments but should be ideally rode over with short term trading & timely profits taking. I do not advise going short in Gold or Silver when there is a global atmosphere of gloom & crisis, but would prefer to be a Buyer at all sharp declines & ride over to the higher range, at the same time holding on to some positions awaiting a clear break through. The time to go short in Gold even amidst Global gloom is yet to come. With a huge crisis going on in the Eurozone, slowdown in China & nothing moving big in the US, upsides in Gold & Silver Prices can only come with massive monetary easing, which has till now (this year) been limited to verbal. So far, the ECB has been small on action and big only on jawboning. Despite this, the market seems to be looking for action soon. Gold may have downside support due to the opportunist buying by Central Banks but nothing to support a sustainable rally. China converting its US$ Forex reserves to Gold has the potential of triggering a rally as the markets will be flooded with trillions of US Dollars offloaded by China. Read more: China Economy demands Action... Gold near the top of its range from recent months with trading Volume, which still remains low, is not a strong indicator of a sustainable move but rather of a decline to its support at the lower end of the range near $1540. A strong resistance for Gold can be expected in the range of $1648 to 1652.5. Only a weekly close above $1652.5 may clear the way for an upside rally & surely not until then.
Silver Prices look attractive as near term range has cracked:
Silver Prices enter a mildly bullish zone after having broken out of the 26.65 – 28.50 range and the next major resistance range will be $31.60 – 32.50. A clear Bullish trend for Silver Prices emerges once this higher resistance range is surpassed with large volumes. Base metals also seem stronger, helped by a stronger tone in the Euro amid improved sentiment on optimistic ECB stance toward Europe’s debt riddled nations. Investors are warming up to the Euro in anticipation of positive news expected from a slew of meetings that are due out of Europe over the next few weeks & amid persistent talk that the ECB may soon introduce a bond-buying initiative.
Silver Prices rise as Yearly Output Declines:
U.S. Silver mining output was 84,900 kgs in May, a 7% MoM rise over April’s production, but a 14% slump on a YoY production, according to the U.S. Geological Survey. Nevada’s silver production was 24,200 kgs in May, up 4,800 kilograms from April and up 6,300 kgs from May 2010. Production from other states was down slightly versus last month, but down significantly compared to last year. Other states’ production totaled 60,700 kgs in May, up 500 kgs from April, but down from May 2010’s level of 81,400 kgs.
Lack of Central Bank actions may prompt a potential Sell Off:
German officials have taken a hard-line approach to Greece & its repetitive demands for bailouts & constant requirements of new and improved financial engineering. A compromise may again be seen that allows Greece to get its next tranche of aid. Greek press reported that the country’s finance minister is preparing a package of spending cuts over the next two years that will be presented to the European Union and International Monetary Fund officials return next month to make its decision about releasing the next tranche of aid. US Fed may also be less likely to undertake aggressive non-conventional stimulus for now. With the S&P 500 at 4 year, High, Fed Bank of Atlanta President Dennis Lockhart sees More Appetite for Risk as also the US Economic Data was seen firm last Month. Risk to monetary policy being employed too aggressively & without effect to address problems that can be resolved only by fiscal reform, as reported by Bloomberg. The much awaited US QE3 can easily be expected to vanish for the time being on these sentiments. Market Traders & Investors should keep a watch for a key ECB meeting next month and ruling on the legality of the ESM – European Stability Mechanism by Germany’s constitutional court.