Gold and silver have opened higher in Asia after a sharp rise in crude oil price and $1400 additional stimulus in USA. There will be short covering in gold and silver if it continues to rise after London opens. Trend of gold and silver in UK session and USA session is the key. Cautious optimism for now.
Apart from CPI numbers, there are no major US economic data releases this week. Bond yields will pay a key role this week. Watch the Japanese Yen against the US dollar. The yen-gold correlation is still in play. Usd/jpy faces long term resistance between 108.75-109.50 zone. Gold will restart is bullish run if usd/jpy is not able to break 108.75-109.50 zone in the next two weeks and falls to 105.40 and below.
U.S. Treasury Secretary Janet Yellen said higher long-term Treasury debt yields were a sign market participants were anticipating a stronger recovery, not of increased inflation concerns. Our View: Central banks have ignored inflation concern. They are ready to accept hyperinflation over the coming months. Central banks believe that hyperinflation is a non-recurring event and will not be there from next year. Gold has fallen after central banks ignore inflation concerns. I believe that the current fall in gold price and more fall in gold price is good for long term. A single crypto currency or a bunch of crypto currency will not replace the US dollar. Crypto currency are a replacement to paper currency. Gold will be the currency among central banks. Some central banks are waiting for more price fall to start increasing their gold reserves. A gold price bottom is near but yet very far.
US February nonfarm payroll suggest continued job growth over the coming months. Texas and other US states are near full opening. Post vaccine economic recovery will only pick up pace in USA and UK.
Copper and base metals are bullish. Last week’s fall was just a healthy correction. The pace of rise of copper and base metals will reduce and not the actual rise. LME copper’s previous resistance of $8400 is now the support. Copper has to trade over $8400 for the next two months to continue its bullish trend. LME Nickel spot has to trade over $14500 for the next two months to continue its bullish trend.
The dark horse among base metals will be Aluminum. Aluminum can correct sharply in the next two months to four months. I expect Aluminum price to double in the next two years (at the most). Aluminum usage in emerging markets will rise multifold over the next three years. Emerging markets are now the growth centers for online shopping and online food delivery among other high growth demand for aluminum usage. All Aluminum engines for electric vehicles will soon be the standard norm. EV boom is just starting (except China). Global Aluminum demand is going to skyrocket in the next three years.
Traders and markets expect WTI crude oil price to rise to $90.00 and more this year. All Asian currencies will weaken significantly if WTI crude oil price rise and stabilze in $80-$90 range. Indian rupee will start to weaken against the US dollar if WTI crude oil price trades over $70.00 for two months and more. IDR, THB, PKR, PHP and other Asian currencies will weaken significantly if crude oil price trades over $70.00 and more. Asian central banks will be caught between growth, hyperinflation and fiscal balance. Precious metals price and base metal price in Asian nation can rise if their local currencies weaken significantly against the US dollar. Keep a close watch on the local currency.
Spot gold: View: (i) Key support is at $1682.30. (ii) Key resistance is at $1717.10. (iii) Gold price has to break and trade over $1717.10 till Wednesday to restarts its bullish run and rise to $1736.30 and $1769.90. (iv) All rise below $1717.10 can be a false start for gold. There will be a chance of $1663.50 in case gold does not break and trade over $1717.10 for the next three days.
Spot silver: View: (i) Silver has to trade over $24.70 till Thursday to rise to $27.49 and $28.35. (ii) Silver will crash only if it trades below $24.70. (iii) Silver will also crash if there is a daily close below $25.10 today,