Gold will continue to rise. Gold prices has a maximum ten percent downside risk till Christmas with infinity as price target. The pace of rise of gold will vary each week and each month. Medium term to long term investors continue to use a buy on dips strategy. Day traders and jobbers remain on the sidelines.
Why Chinese premiums or Chinese demand is important for the next three weeks?
1. Chinese economy is expected to recover the quickest in the post covid world. US and the world is still dependent on Chinese imports to meet the daily needs of its people. Chinese exports may fall due to trade curbs. Chinese exports will not nosedive. Differentiate between the words “fall” and “nosedive”.
2. There is a report in www.marketwatch.com which says that American consumers will start buying as early as 10th October and will continue till the New Year. Discounts both online and offline can start in the USA anytime on or after 10th October. American consumers should spend big in most of the final quarter. Industrial metals demand will remain on the higher side in the USA and China.
3. China has a mini vacation in the first week of October. Chinese consumers will spend aggressively during their holidays. Gold and silver demand (by way of jewelry purchases) in China should beat street expectations by a big margin. Chinese discount on gold and silver should move to premium.
4. IF restocking demand by Chinese factories slides in the next three week’s then copper and silver prices will see a “V” shaped price move. A quick crash followed by an equally big rise.
5. Chinese factories are buying due to global demand and internal demand. Any sharp reduction and sustained reduction in global industrial metal demand can see outflows from copper ETF, short sellers trying to get an upper hand in CME futures and physical buyers buying in “UNFIX” mode.
Industrial metal bulls, industrial metal investors and stocks and resellers of industrial metals are banking on a sharp rise in global demand between November and February 2021. India has festivals from 17th October to 17th November. US Thanksgiving sales will be there from the last week of November to the first week of December. After this global Christmas and New Year demand is expected. Chinese New Year demand will be there from the last week of January 2021 to end February 2021. In between there is also the big valentine day spending on 14th February 2021. This upcoming demand cycle is the key reason for the world to be bullish on industrial metals. Silver is an industrial metal as well. Mine supplies are limited due to covid. There can be further mine supply shock if nations which have big mines experience a second wave of covid or third wave of covid.
The Eurozone and UK are fearing a second wave of covid. Schools and educational institutions opened and closed as well. It seems that the summer travel and summer tourism in Eurozone and UK has resulted in a big spread of covid. A second wave of covid in the final quarter of the year will be disastrous for the global economy, industrial metals demand, stocks and bond yields.
The helicopter money and the drone money is already there. Additional money from space by central bankers will neither create jobs nor will result in higher consumer spending. These will all go to risky asset classes. Every asset class including gold will see boom and bust every few days or every few weeks. The fall in gold price or the busting in gold price should be used to invest. Gold price will rise irrespective of any news. Inflation or cost of living is rising with each passing of each month. Central banks are happy with inflation. Central banks happiness is at the cost of common man’s apathy. Your savings moves into debt. You will move into “hand to mouth living” thanks to the central bank's obsession with inflation. Inflation and gold price always move in the same direction.
Crude oil has formed a medium term bottom last week and should break past $50 in October. Indian petrol demand in August has reached pre covid levels and is expected to rise. Indian diesel demand was just six percent lower (in August) from pre covid levels. Every nation is seeing continued rise in energy demand. A part reason is partial closure of public transport.
Nickel prices should see a $700-$800 one way price move anytime in October. I am hyper bullish in Nickel in the final quarter of the year. I will –prefer to use sharp dips to invest in Nickel.
COMEX SILVER DECEMBER 2020 – current price $2705.80
Breakdown Level: $2657.00
- Silver needs to trade over $2624-$2657 zone this week to rise to $2858 and $3037.
- Silver will crash if it trades below $2657 this week.