SUMMARY:-
· Prices continue to out perform Gold on both the upside and the downside. In 2010, Silver is expected to range between $13/oz and $25/oz.
· Investment demand is expected to remain strong in 2010, but a rebound in fabrication demand should see buying pressure increase.
· After the slump into recession in 2008, the recovery has been fast, but we doubt it is sustainable and therefore expect further distress to be seen in the months ahead.
· The dollar may be oversold in the short term, but structural problems suggest further dollar weakness is likely and that could lead to a dollar crisis. With the supply overhang, investors are going to have to continue buying Silver, but given their current interest and the big picture outlook, this is likely to happen.
Introduction :-
Since moving above $10/oz in March 2006, Silver prices have been on a roller-coaster ride with some fast and long rallies interspersed with steep and aggressive sell-offs; none more so than the drop from $21.36/oz to $8.50/oz between March and October 2008. However, the strong rebound after last year’s sell-off does indicate ongoing steady interest. Silver has benefitted from being both an industrial metal and a cheap precious metal, as industrial metals have rallied strongly in anticipation of an economic recovery and as a cheap precious metal, it has won market share from Gold jewellery. Also as a precious metal it has been sought after as a hedge against dollar weakness and financial distress. Given the diverse nature of Silver demand, prices are expected to perform well as even if weakness is seen in one area of demand, the other
areas should hold up and indeed could see demand accelerate. Silver also does not have the threat of IMF sales overhanging it. Generally for these reasons we feel there is still good upside potential for Silver and with prices (basis $17.50/oz) still 18% below last years’ highs and arguably still 185% below the 1980 highs, the outlook remains bullish. However, given Silver’s supply/demand situation the outlook for Silver can only be bullish while investors remain as committed to buying Silver as they have been in recent years. Over the past five years fabricated demand has on average been around 2,000 tonnes lower then supply. While investors are prepared to buy this surplus then higher prices can be seen, but should investors’ interest wane then Silver prices could tumble. Overall, we remain bullish for Silver as it is likely to follow in Gold’s footsteps and at times outperform it. In last year’s Forecast report we were looking for the bulk of trading in 2009 to be between $11/oz and $18/oz; the low in January 2009 was $10.33/oz and the high has so far been $17.93/oz. In 2010, we feel Silver will trade within a $13/oz to $25/oz range as we expect more turbulence in the financial markets
Industrial Demand :-
Industrial demand accounts for 43% of total Silver end-use demand and is of paramount importance to the Silver market. In recent years global growth has been expanding at a fast pace, but this slowed to 1.4% in 2008 and is off significantly so far in 2009. Indeed industrial demand is expected to drop some 12% this year, but is expected to recover next year as a more broad based recovery is likely. The IMF forecast for World economic growth is 3% in 2010, after a 1% drop in global GDP in 2009. With industrial applications accounting for 54% of fabrication demand, which is up from 38% ten years ago and with India, China and the US, accounting for 70% of this rise in industrial usage and with Silver now being used in a wide
spread of new applications, demand is expected to recover faster than GDP growth. As such, we expect Silver’s industrial demand to grow around 7% in 2010. In addition to growth picking up more than global GDP, after the destocking seen over the past year, we expect restocking to see apparent demand rise even faster than actual demand. Therefore the combination of restocking, a pick- up in actual demand and ongoing investment buying, could certainly see Silver prices continue to rise strongly
Investment demand :-
With Silver supply outpacing fabrication demand in recent years, investors’ off-take has been critical in driving the overall bull market and the emergence of Exchange Traded Funds (ETFs) have been central in
facilitating this growth in investment demand. When the first ETF was launched in April 2006, it started with 653 tonnes of Silver, the peak holding to date was 11,112 tonnes, seen in August this year. As the chart opposite shows growth has been strong and steady; there have been periods of light redemptions along the way, but the trend is firmly up. At the end of September 2009, the combined holdings stood at 10,958 tonnes, which is 1.4% below the peak, but still 32% up since the start of the year. In 2008, the combined holdings grew 2,326 tonnes; in the nine months to the end of September 2009, the ETFs have grown by 2,702 tonnes. The fact that redemptions up until now have been light, suggests that long term investors are still buying into Silver’s safe-haven purposes.The presence of this above ground Silver stockpile is a potential threat to prices if mass liquidation were to unfold, especially as the total combined holdings is equivalent to roughly half a year’s mine supply. However, in the current environment of financial uncertainty and dollar weakness we would be surprised if investors were ready to sell the protection Silver offers them. This is especially so as prices are still well below the peak seen in 2008 at $21.36/oz. However, there is no denying the fact that the Silver in the ETF’s is potentially very liquid and therefore trends in the ETFs’ holdings need to be monitored carefully
More room for speculators :-
The net Fund Silver position pulled back heavily during last year’s second half selloff, but the position is climbing again and remains well below the peaks seen in 2006, 2007 and 2008. With the net long position
last at 47,410 contracts, it is still 12.4% below the peak in 2008 and 29.2% below the high in 2006. So with Silver prices also 23% below their 2008 peak, there seems good potential for prices to rise if the situation
remains bullish. Indeed, in this respect, Silver looks better placed than Gold to extend gains as the net long Fund position in Gold is already at record levels. As such, it does look as though Silver will continue to outperform Gold on the upside.
Technical outlook;-
Following the rapid sell-off in the second half of 2008, Silver prices have been trending higher again in an upward channel. Prices recently tackled the band of overhead supply seen between March and July last year between $16.20-$19.00/oz, but resistance was encountered around $17.65/oz and prices have now pulled back to consolidate. With the stochastic indicators also crossing lower Silver prices may now pull back towards the bottom of the channel which is around the $14/oz level, which is also where the 30 week (150 day) moving average is. However if the up channel continues to push prices higher then prices are likely to gradually overcome the overhead band of supply - the top of which is at $19.47/oz, which would then open up the way for a rechallenge of the highs at $21.36/oz.
Conclusion and Forecast :-
The situation in Silver is very interesting, even before the recession the market was running a supply surplus and this was made worse by the drop in demand, even though supply was cut too. However, the distress in the markets and concern over how this financial mess and the global imbalances are going to be corrected has increased demand for safe-haven assets, such as the precious metals. In the medium term, while the supply surplus is present, Silver will be vulnerable if investors’ commitment to Silver wanes. If investment interest fails to soak up the annual surplus prices are likely to fall, indeed falling prices would then no doubt trigger liquidation of existing positions that would add to the downside pressure on prices. However,
we do not think such a scenario will unfold between now and the end of 2010, although there is no harm in having a contingency plan for when such a time arrives. Investor interest as seen by the steady climb in the ETFs’ holdings shows ongoing strong demand and with ETFs increasing their size by some 2,700 tonnes in the first nine months of 2009, it does look as though this will more than absorb the market’s surplus. With ongoing concern about the dollar and US creditors vocally warning about dollar devaluation, not to mention the risk of a double-dipped recession, there seems plenty of reasons for investors and investment institutions to look to safe-guard their wealth and to diversify their dollar exposure, all of which should underpin demand for precious metals.In the near term, prices are expected to consolidate, but there is also a risk of a deeper correction in equities and industrial metals, that could drag Silver prices lower initially. However, we think dips in Silver prices will be seen as a buying opportunity, by investors and fabricators alike. In addition, we expect fabrication demand to recover later in 2010 and with that is likely to come industrial restocking. So Silver could, for a time, see strong demand from all areas of demand. In addition, we feel Silver is likely to follow in Gold’s footsteps and as such we expect prices to spend the bulk of 2010 within a $13-$25/oz trading range. Should central bankers and politicians manage to find workable solutions to the bigger issues troubling the financial markets then demand for safe-haven products could suffer and then some fast
corrections would likely follow, but we think there is little chance of this happening any time soon and therefore we remain bullish for Silver.
Friday, October 30, 2009
EXPECTATION OF COMEX GOLD FOR THE YEAR 2010 WITH FUNDAMENTAL AND TECHNICAL ANALYSIS ::
EXPECTATION OF COMEX GOLD FOR THE YEAR 2010 WITH FUNDAMENTAL AND TECHNICAL ANALYSIS ::
INTRODUCTION ::
• The Gold rally continues with prices posting fresh all time highs in early October, the rally is expected to continue within an $850-$1,400/oz trading range in 2010.
• After the turmoil in the financial markets last year a strong rebound has been seen, but with numerous large issues unresolved the rebound seems unsustainable.
• The fact Gold prices are this high suggests there is still a lot of fear in the markets. If a double dipped recession unfolds, prices could have considerably further to run.
• The outlook for Gold remains bullish, as it continues to provide a hedge against weakness in fiat currencies and further turmoil in the markets. It should also provide protection against inflation at a later date.
BRIEF VIEW ::
The onset of the financial crisis in the summer of 2008 saw Gold prices sell-off sharply, which to many people was a surprise as given the turmoil in the markets and fear for the banking system, Gold should have been attracting safehaven buying. Indeed it was, but the buying could not absorb all the selling on the back of deleveraging that was happening as the market sold liquid assets to pay margin against their less liquid assets. The sell-off saw prices drop to a low of around $682/oz in October 2008, before the buying once again dominated and investors and traders moved into Gold to protect their capital against the uncertainty swirling around the financial markets. After rebounding to $1,006/oz in February 2009, Gold prices then consolidated in a broad sideways range between $865-$990/oz as the market digested what had happened and what was likely to happen going forward. The fact Gold prices have broken out to the upside of this consolidation pattern is bullish for Gold, but is also a warning that the market feels there is more trouble for the financial markets in the weeks and months ahead. Whether this trouble comes in the form of a double dipped recession, a dollar or bond crisis, or stagflation, inflation, or deflation, remains to be seen Factors driving Gold prices The dollar – After the dollar weakness seen between 2006 and mid-2008, the dollar started to rebound in July 2008, (see chart opposite) as risk reduction gathered pace and US companies repatriated assets previously held overseas. In addition, the market turned to its traditional safe-havens which included the dollar. However, the dollar’s rebound ran out of steam as the US’s policies to tackle the financial crisis became clear – notably to push more money into the failing systems and to finance this by borrowing and by means of quantitative easing. The creation of more debt and the increase in money supply by quantitative easing, have not surprisingly raised concern that the dollar is being devalued. In turn the down trend in the dollar has resumed with the dollar falling against most currencies. Interestingly enough, the better- than-expected economic data that has boosted the US equity markets has so far failed to underpin the dollar, which is a sign of deteriorating confidence in the dollar. However, once the US makes it clear that it has a policy to soak up the extra money supply, then the combination of this and economic recovery (when it eventually gets going) is likely to see the dollar turn higher. However, if the prospects for growth and loose monetary policy are also seen as being inflationary, then a stronger dollar will not necessarily mean weaker Gold.
INFLATION FEARS ::
At present, there is little inflation around; indeed, deflation is more in evidence, although the market does not seem too concerned about deflation as the underlying fear is that all the quantitative easing and global stimulus packages will end up being inflationary. Although in theory governments should be able to tighten monetary policy to out- manoeuvre inflation, there is concern that slow growth and high unemployment rates will make it hard for governments to be proactive and any delay in tightening policy when the time come s, could see inflation take hold. As a result, the threat of inflation down the road is another driving force for Gold, even if it may be premature to be too concerned about it at the moment.
De-hedging – At the start of the bull market for Gold, which roughly coincided with the start of de- hedging, the total hedge book stood at 3,107 tonnes (99.9Moz). Eight years later it has already fallen to 458 tonnes (14.7Moz). As the hedge book shrinks the level of de-hedging has not surprisingly slowed, but is still running at around 125 tonnes a year and is likely to continue to provide support next year. However, after years of providing support de-hedging will become less of an issue in the years ahead and then the combination of high Gold prices with improving prospects for economic recovery and therefore less need for safe-havens, could well start to see producers look at re-establishing hedges. Although the current wishes of shareholders of mining companies is for no, or limited, hedging, that might change if the bullish outlook for Gold changes as we move into a new economic era. However, we would expect the next hedging wave to be done via put options and not outright forward/futures sales.
For the moment the mood amongst producers is, in the majority, still bullish for the Gold price in the period ahead.
Central Bank Official Sales –
For the fourth year running sales made under the Central Bank Gold Agreement (CBGA) have failed to reach the maximum amount of 500 tonne s allowed by the agreement. In the CBGA year that ended in September 2006, sales were 104 tonnes short of the 500 tonne allowance; in 2006/07 sales fell short by around 24 tonnes; in the 2007/08 period sales were 143 tonnes short of the limit and in the year to 26th September 2009, sales totalled 160 tonne,340 tonnes short of the limit. So for CBGA-2 as a whole , sales of between 1,880 and 1,900 tonnes were some 75% of the permitted 2,500 tonnes. On 7th August, 2009, a ne w fiveyear CBGA was announced by its 19 signatory members, but the annual quota was cut to 400 tonnes, even though the IMF has said it plans to sell its 403.3 tonnes of Gold during CBGA-3. However, with China and Russia looking to increase Gold reserves, net supply from official sales may be limited in the years ahead.
Central Bank diversification –
The global financial crisis has exposed how vulnerable central banks are to the dollar and US Treasuries. As a result, a number of large sovereign holders of US dollars and Treasuries have started to diversify their holding. China surprised the market in April 2009, when it announced its Gold reserves had increased 76% to 1,054 tonnes since 2003, when it held 600 tonnes. However, this higher holding still represents only 1.9% of total reserves. With China holding over $2 trillion of currency reserves and with some 70% of this in dollar denominated assets, China is heavily exposed to the value of the US dollar and not surprisingly is keen to diversify. There is talk that China might buy some of the Gold that the IMF is selling, but China is also likely to prefer to continue buying Gold from its domestic producers. In 2007, China surpassed South Africa as the world’s largest Gold producer with production reaching 282 tonnes in 2008 and rising 13.5% in the first half of 2009. In addition, Russia has continued to build up its Gold reserves. It bought 69 tonnes in 2008 and in the January to August period this year, it has bought a further 62 tonnes. As of September, it held some 568 tonnes, or 4.3% of its reserves. Back in November 2005 it stated that it would be appropriate to hold 10% of its reserves in Gold, which would mean increasing Gold holdings to 1,320 tonnes. Holding 10% of reserves in Gold is about the average that all countries hold although, however, the Euro area holds an average of 59.7%, the US holds 77.4%, while Japan holds just 2.3% and Korea holds just 0.2%.
TECHNICAL OUTLOOK ::
After a long period of consolidation after the run up to $1,006/oz in February 2009, prices have broken higher out of the triangle and are in the process of setting fresh all time highs. At present prices do not look too extended and the stochastic indicators are looking strong too. The strong rally in August 2007, went from $640/oz to $1,032.50/oz, a move of close to $400/oz, so with this latest bullrun starting around $680/oz a similar run would take prices towards $1,100/oz. As far as pull backs are concerned, the uptrend line at $970/oz should provide support as should the $1,000/oz area. A move below the uptrend line would then suggest a possible pull back to around the $900/oz area, where the 60 week moving average lies. The stochastics did recently cross lower but failed to move down too far and have now crossed higher. A similar situation was seen in January 2009 and after the stochastics crossed higher again price went on to rise $200/oz. With prices breaking into new high ground, we would target $1,250/oz as the next major upside target. (After the move above $850/oz prices climbed 21.5%, so a similar percentage move from $1,032.50/oz is $1,254/oz). Overall we expect Gold to extend its gains, but once the next peak has been established another long period of consolidation is likely to follow as the market adjusts to the price rise.
FORECAST & CONCLUSION ::
Gold is going through a very interesting time, but there are a multitude of factors influencing the price some of which are quite contradictory such as the presence of deflation and the fear of inflation. We also have an uneasy feeling that after the near catastrophic events seen over the past twelve months, the sharp recovery seen since March seems too good to be true and for that reason it probably is. Indeed given the massive governments’ stimulus packages and bailouts mainly paid for with borrowed and printed money, there is considerable uncertainty as to what lies ahead. The global imbalance between those countries that have massive dollar debt and those with huge dollar reserves, is also coming to a head as the US seems set on a path to devalue the dollar by means of quantitative easing. In addition, the weak dollar is prompting competitive currency devaluation and with numerous former ‘hard’ currencies trying to lose value, it is not surprising that faith in fiat currencies is waning and those with money are looking to diversify into assets with intrinsic value, of which Gold and other commodities are top of the list. Indeed this might well be what is driving base metals higher, even though demand is weak and stockpiles are mounting. The fact US dollar creditors are talking about the need for another global reserve currency shows that they are losing faith in the dollar. Overall, given the parlous condition of the world’s financial markets in recent years, it is doubtful that the short-sharp asset-bubble deflation seen in the second half of 2008 and first quarter of 2009, resolved the matter completely. There are still many unsolved problems and imbalances that need to be settled and as there does not seem to be any easy way to fix them, the financial system and the heavily indebted countries are likely to experience more hardship in the future. The Western financial system has always had been founded on confidence, and in 2008 this confidence was shattered. The rebound across markets this year has restored some hope but with many of the underlying issues unresolved, this new dawn may prove false. If events take another turn for the worse, the fear seen in 2008 is likely to be renewed and another flight to safety could well keep the bull market in Gold go ing for a considerable while longer and a take prices considerably higher. It seems likely that there is still a big window of opportunity for Go ld to shine in the months ahead. At some stage, the problems facing the global economy, especially those in the West, will be solved and a return to normality will unfold. When that process begins, safe-haven assets are likely to be sold. However until such time, Gold is likely to remain highly soughtafter as a store of wealth and we would not be surprised to see Gold prices rise to, perhaps significantly, new highs. There are likely to be periods of widespread risk reduction that carry Gold prices lower too, but each dip is expected to attract strong scale down buying from investors and fabricators. Overall, we would expect the bulk of trading between now and the end of 2010 to be within the $850/oz to $1,400/oz range.
INTRODUCTION ::
• The Gold rally continues with prices posting fresh all time highs in early October, the rally is expected to continue within an $850-$1,400/oz trading range in 2010.
• After the turmoil in the financial markets last year a strong rebound has been seen, but with numerous large issues unresolved the rebound seems unsustainable.
• The fact Gold prices are this high suggests there is still a lot of fear in the markets. If a double dipped recession unfolds, prices could have considerably further to run.
• The outlook for Gold remains bullish, as it continues to provide a hedge against weakness in fiat currencies and further turmoil in the markets. It should also provide protection against inflation at a later date.
BRIEF VIEW ::
The onset of the financial crisis in the summer of 2008 saw Gold prices sell-off sharply, which to many people was a surprise as given the turmoil in the markets and fear for the banking system, Gold should have been attracting safehaven buying. Indeed it was, but the buying could not absorb all the selling on the back of deleveraging that was happening as the market sold liquid assets to pay margin against their less liquid assets. The sell-off saw prices drop to a low of around $682/oz in October 2008, before the buying once again dominated and investors and traders moved into Gold to protect their capital against the uncertainty swirling around the financial markets. After rebounding to $1,006/oz in February 2009, Gold prices then consolidated in a broad sideways range between $865-$990/oz as the market digested what had happened and what was likely to happen going forward. The fact Gold prices have broken out to the upside of this consolidation pattern is bullish for Gold, but is also a warning that the market feels there is more trouble for the financial markets in the weeks and months ahead. Whether this trouble comes in the form of a double dipped recession, a dollar or bond crisis, or stagflation, inflation, or deflation, remains to be seen Factors driving Gold prices The dollar – After the dollar weakness seen between 2006 and mid-2008, the dollar started to rebound in July 2008, (see chart opposite) as risk reduction gathered pace and US companies repatriated assets previously held overseas. In addition, the market turned to its traditional safe-havens which included the dollar. However, the dollar’s rebound ran out of steam as the US’s policies to tackle the financial crisis became clear – notably to push more money into the failing systems and to finance this by borrowing and by means of quantitative easing. The creation of more debt and the increase in money supply by quantitative easing, have not surprisingly raised concern that the dollar is being devalued. In turn the down trend in the dollar has resumed with the dollar falling against most currencies. Interestingly enough, the better- than-expected economic data that has boosted the US equity markets has so far failed to underpin the dollar, which is a sign of deteriorating confidence in the dollar. However, once the US makes it clear that it has a policy to soak up the extra money supply, then the combination of this and economic recovery (when it eventually gets going) is likely to see the dollar turn higher. However, if the prospects for growth and loose monetary policy are also seen as being inflationary, then a stronger dollar will not necessarily mean weaker Gold.
INFLATION FEARS ::
At present, there is little inflation around; indeed, deflation is more in evidence, although the market does not seem too concerned about deflation as the underlying fear is that all the quantitative easing and global stimulus packages will end up being inflationary. Although in theory governments should be able to tighten monetary policy to out- manoeuvre inflation, there is concern that slow growth and high unemployment rates will make it hard for governments to be proactive and any delay in tightening policy when the time come s, could see inflation take hold. As a result, the threat of inflation down the road is another driving force for Gold, even if it may be premature to be too concerned about it at the moment.
De-hedging – At the start of the bull market for Gold, which roughly coincided with the start of de- hedging, the total hedge book stood at 3,107 tonnes (99.9Moz). Eight years later it has already fallen to 458 tonnes (14.7Moz). As the hedge book shrinks the level of de-hedging has not surprisingly slowed, but is still running at around 125 tonnes a year and is likely to continue to provide support next year. However, after years of providing support de-hedging will become less of an issue in the years ahead and then the combination of high Gold prices with improving prospects for economic recovery and therefore less need for safe-havens, could well start to see producers look at re-establishing hedges. Although the current wishes of shareholders of mining companies is for no, or limited, hedging, that might change if the bullish outlook for Gold changes as we move into a new economic era. However, we would expect the next hedging wave to be done via put options and not outright forward/futures sales.
For the moment the mood amongst producers is, in the majority, still bullish for the Gold price in the period ahead.
Central Bank Official Sales –
For the fourth year running sales made under the Central Bank Gold Agreement (CBGA) have failed to reach the maximum amount of 500 tonne s allowed by the agreement. In the CBGA year that ended in September 2006, sales were 104 tonnes short of the 500 tonne allowance; in 2006/07 sales fell short by around 24 tonnes; in the 2007/08 period sales were 143 tonnes short of the limit and in the year to 26th September 2009, sales totalled 160 tonne,340 tonnes short of the limit. So for CBGA-2 as a whole , sales of between 1,880 and 1,900 tonnes were some 75% of the permitted 2,500 tonnes. On 7th August, 2009, a ne w fiveyear CBGA was announced by its 19 signatory members, but the annual quota was cut to 400 tonnes, even though the IMF has said it plans to sell its 403.3 tonnes of Gold during CBGA-3. However, with China and Russia looking to increase Gold reserves, net supply from official sales may be limited in the years ahead.
Central Bank diversification –
The global financial crisis has exposed how vulnerable central banks are to the dollar and US Treasuries. As a result, a number of large sovereign holders of US dollars and Treasuries have started to diversify their holding. China surprised the market in April 2009, when it announced its Gold reserves had increased 76% to 1,054 tonnes since 2003, when it held 600 tonnes. However, this higher holding still represents only 1.9% of total reserves. With China holding over $2 trillion of currency reserves and with some 70% of this in dollar denominated assets, China is heavily exposed to the value of the US dollar and not surprisingly is keen to diversify. There is talk that China might buy some of the Gold that the IMF is selling, but China is also likely to prefer to continue buying Gold from its domestic producers. In 2007, China surpassed South Africa as the world’s largest Gold producer with production reaching 282 tonnes in 2008 and rising 13.5% in the first half of 2009. In addition, Russia has continued to build up its Gold reserves. It bought 69 tonnes in 2008 and in the January to August period this year, it has bought a further 62 tonnes. As of September, it held some 568 tonnes, or 4.3% of its reserves. Back in November 2005 it stated that it would be appropriate to hold 10% of its reserves in Gold, which would mean increasing Gold holdings to 1,320 tonnes. Holding 10% of reserves in Gold is about the average that all countries hold although, however, the Euro area holds an average of 59.7%, the US holds 77.4%, while Japan holds just 2.3% and Korea holds just 0.2%.
TECHNICAL OUTLOOK ::
After a long period of consolidation after the run up to $1,006/oz in February 2009, prices have broken higher out of the triangle and are in the process of setting fresh all time highs. At present prices do not look too extended and the stochastic indicators are looking strong too. The strong rally in August 2007, went from $640/oz to $1,032.50/oz, a move of close to $400/oz, so with this latest bullrun starting around $680/oz a similar run would take prices towards $1,100/oz. As far as pull backs are concerned, the uptrend line at $970/oz should provide support as should the $1,000/oz area. A move below the uptrend line would then suggest a possible pull back to around the $900/oz area, where the 60 week moving average lies. The stochastics did recently cross lower but failed to move down too far and have now crossed higher. A similar situation was seen in January 2009 and after the stochastics crossed higher again price went on to rise $200/oz. With prices breaking into new high ground, we would target $1,250/oz as the next major upside target. (After the move above $850/oz prices climbed 21.5%, so a similar percentage move from $1,032.50/oz is $1,254/oz). Overall we expect Gold to extend its gains, but once the next peak has been established another long period of consolidation is likely to follow as the market adjusts to the price rise.
FORECAST & CONCLUSION ::
Gold is going through a very interesting time, but there are a multitude of factors influencing the price some of which are quite contradictory such as the presence of deflation and the fear of inflation. We also have an uneasy feeling that after the near catastrophic events seen over the past twelve months, the sharp recovery seen since March seems too good to be true and for that reason it probably is. Indeed given the massive governments’ stimulus packages and bailouts mainly paid for with borrowed and printed money, there is considerable uncertainty as to what lies ahead. The global imbalance between those countries that have massive dollar debt and those with huge dollar reserves, is also coming to a head as the US seems set on a path to devalue the dollar by means of quantitative easing. In addition, the weak dollar is prompting competitive currency devaluation and with numerous former ‘hard’ currencies trying to lose value, it is not surprising that faith in fiat currencies is waning and those with money are looking to diversify into assets with intrinsic value, of which Gold and other commodities are top of the list. Indeed this might well be what is driving base metals higher, even though demand is weak and stockpiles are mounting. The fact US dollar creditors are talking about the need for another global reserve currency shows that they are losing faith in the dollar. Overall, given the parlous condition of the world’s financial markets in recent years, it is doubtful that the short-sharp asset-bubble deflation seen in the second half of 2008 and first quarter of 2009, resolved the matter completely. There are still many unsolved problems and imbalances that need to be settled and as there does not seem to be any easy way to fix them, the financial system and the heavily indebted countries are likely to experience more hardship in the future. The Western financial system has always had been founded on confidence, and in 2008 this confidence was shattered. The rebound across markets this year has restored some hope but with many of the underlying issues unresolved, this new dawn may prove false. If events take another turn for the worse, the fear seen in 2008 is likely to be renewed and another flight to safety could well keep the bull market in Gold go ing for a considerable while longer and a take prices considerably higher. It seems likely that there is still a big window of opportunity for Go ld to shine in the months ahead. At some stage, the problems facing the global economy, especially those in the West, will be solved and a return to normality will unfold. When that process begins, safe-haven assets are likely to be sold. However until such time, Gold is likely to remain highly soughtafter as a store of wealth and we would not be surprised to see Gold prices rise to, perhaps significantly, new highs. There are likely to be periods of widespread risk reduction that carry Gold prices lower too, but each dip is expected to attract strong scale down buying from investors and fabricators. Overall, we would expect the bulk of trading between now and the end of 2010 to be within the $850/oz to $1,400/oz range.
Thursday, October 29, 2009
VIEWS FOR 29 OCTOBER 2009
INTERNATIONAL SPOT GOLD;-Another support of 1035$ was violated yesterday.
Sell on fall below 1026$ with high of the day stop loss.
Traders who are holding short positions can keep a stop loss of 1044$.
Expect lower level of 1015$ to be tested
INTERNATIONAL SPOT SILVER:-The low of 15.7$ is likely to be tested.
Traders who are holding short positions can maintain a stop loss of 16.77$.
Sell on fall below 16.08$ with high of the day stop loss.
MCX GOLD TRADING STRATERGY:-Sell on fall below 15810 with high of the day stop loss.
Intra-day traders can wait for a rise above 15924 and when it falls below 15924 then sell with high above 15924 as the stop loss.
MCX SILVER TRADING STRATERGY;-Hold short with a stop loss of 26411.
Sell on rise to 26090-26294 with a stop loss of 26411.
Expect lower range of 25768-25564 to be tested.
In case of close below 25715 with a negative candle, Silver can slide down towards 24312.
MCX Gold Dec:Support at 15797/15828 has held well.Dips to 15843 could be bought with stop loss at 15766 targeting 16105. S1:15803 S2:15723 R1:15963 R2:16043.
MCX Silver Dec: Retracement towards 26318 followed by 26958 levels. Dips to 25758 / 25838 to find support targeting above-mentioned levels.Direct fall below 25758 to result in a further decline towards 25358. S1: 25852 S2: 25722 R1: 26112 R2: 26242.
MCX Copper November: While below 311 expect the decline to continue towards 300.55 levels.Good support will be seen in the 298.50/300.60 zones. S1: 304.30 S2: 300.30 R1: 312.30 R2: 316.30.
MCX Crude November: Ideally 3612 to hold for the rally to resume higher again towards 3798 or even higher. S1: 3639 S2: 3599 R1: 3719 R2: 3759.
MCX Zinc Oct: Rallies to 103.50 -104.0 to find resistance for a move lower towards 101 levels.A rise above 106.0 to raise doubts.S1:102.0 S2:101.0 R1:104.00 R2:105.10
Watch out for:
Eurozone Business Climate/Consumer Confidence
US GDP/Personal Consumption
Natural Gas Storage Data
GOLD (spot): Last 1032.3
Even as the broad bias remains negative, we are in for some quick choppy consolidation, before the next directional move, with most of the measure downside objectives having met.
Trading Strategies:
Sell at 1032, TGT1029/26
Buy near 1026/24
Sell below 1022. TGT 1014/1005
Buy above 1033.2TGT 1039
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Nymex Crude(Dec): Targets 76.2
Should fall straight away or from 77.4/77.8 towards 76.2. Formation of H&S adds the ideal set up for this move. However, further sell off’s likelihood rests on how well 76 region holds. H&S pattern suggests a fall through, however, it is highly likely this region, being the year’s top for almost 5 months until October month, could hold. A pull back above 78.9 would be a major bullish move.
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Comex Copper (Dec): A feeble swing higher.
Prices area at the lower extremity of the rising trendline, suggesting a pull back higher. However, it would require a push aboce 2.94/5 before such moves would strengthen towards 2.996
NOTE:- THIS WEEKEND WE ARE REALISING OUR 2010 FORCAST AND BIG PICTURE MOVE IN GOLD AND SILVER ANY INTERESTED PERSONS CAN CONTACT OUR CUSTOMER CARE IN THAT CONFERENCE CALL U CAN CLARIFFY YOUR DOUBT WITH OUR RESEARCH ANALYST
Sell on fall below 1026$ with high of the day stop loss.
Traders who are holding short positions can keep a stop loss of 1044$.
Expect lower level of 1015$ to be tested
INTERNATIONAL SPOT SILVER:-The low of 15.7$ is likely to be tested.
Traders who are holding short positions can maintain a stop loss of 16.77$.
Sell on fall below 16.08$ with high of the day stop loss.
MCX GOLD TRADING STRATERGY:-Sell on fall below 15810 with high of the day stop loss.
Intra-day traders can wait for a rise above 15924 and when it falls below 15924 then sell with high above 15924 as the stop loss.
MCX SILVER TRADING STRATERGY;-Hold short with a stop loss of 26411.
Sell on rise to 26090-26294 with a stop loss of 26411.
Expect lower range of 25768-25564 to be tested.
In case of close below 25715 with a negative candle, Silver can slide down towards 24312.
MCX Gold Dec:Support at 15797/15828 has held well.Dips to 15843 could be bought with stop loss at 15766 targeting 16105. S1:15803 S2:15723 R1:15963 R2:16043.
MCX Silver Dec: Retracement towards 26318 followed by 26958 levels. Dips to 25758 / 25838 to find support targeting above-mentioned levels.Direct fall below 25758 to result in a further decline towards 25358. S1: 25852 S2: 25722 R1: 26112 R2: 26242.
MCX Copper November: While below 311 expect the decline to continue towards 300.55 levels.Good support will be seen in the 298.50/300.60 zones. S1: 304.30 S2: 300.30 R1: 312.30 R2: 316.30.
MCX Crude November: Ideally 3612 to hold for the rally to resume higher again towards 3798 or even higher. S1: 3639 S2: 3599 R1: 3719 R2: 3759.
MCX Zinc Oct: Rallies to 103.50 -104.0 to find resistance for a move lower towards 101 levels.A rise above 106.0 to raise doubts.S1:102.0 S2:101.0 R1:104.00 R2:105.10
Watch out for:
Eurozone Business Climate/Consumer Confidence
US GDP/Personal Consumption
Natural Gas Storage Data
GOLD (spot): Last 1032.3
Even as the broad bias remains negative, we are in for some quick choppy consolidation, before the next directional move, with most of the measure downside objectives having met.
Trading Strategies:
Sell at 1032, TGT1029/26
Buy near 1026/24
Sell below 1022. TGT 1014/1005
Buy above 1033.2TGT 1039
--------------------------------------------------------------------------------
Nymex Crude(Dec): Targets 76.2
Should fall straight away or from 77.4/77.8 towards 76.2. Formation of H&S adds the ideal set up for this move. However, further sell off’s likelihood rests on how well 76 region holds. H&S pattern suggests a fall through, however, it is highly likely this region, being the year’s top for almost 5 months until October month, could hold. A pull back above 78.9 would be a major bullish move.
--------------------------------------------------------------------------------
Comex Copper (Dec): A feeble swing higher.
Prices area at the lower extremity of the rising trendline, suggesting a pull back higher. However, it would require a push aboce 2.94/5 before such moves would strengthen towards 2.996
NOTE:- THIS WEEKEND WE ARE REALISING OUR 2010 FORCAST AND BIG PICTURE MOVE IN GOLD AND SILVER ANY INTERESTED PERSONS CAN CONTACT OUR CUSTOMER CARE IN THAT CONFERENCE CALL U CAN CLARIFFY YOUR DOUBT WITH OUR RESEARCH ANALYST
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