There are two possible situations in gold after NFP release at 6:00 pm Indian Time. (a) Gold will crash if it does not break and trade over $1740. (b) There will be rallies in gold in case gold does not fall below $1703 today and till Tuesday.
Traders are looking for clues for a pause in interest rate hikes by the Federal Reserve. Energies price rise this week and the bullish outlook for the rest of the year makes me believe that Federal Reserve will raise interest rates by a minimum 0.50% on 2nd November meeting. Pause in US interest rate hike will be there if US inflation falls continuously between September to November.
Physical demand is high in Asia for both precious metals and base metals. Whether this demand is cyclical or sustainable, we will come to know only by the middle of November. Weak Asian currencies have also ensured high premiums for gold, silver, copper, and zinc.
China will open on Monday. Chinese demand for precious metals and base metals (if significant) can be trend changing.
US treasury secretary Yellen’s speech
- Urged the World Bank Group and other multilateral development banks to revamp their business models and dramatically boost lending to address pressing global needs such as climate change.
- Among changes she is requesting are plans to harness more private capital and use more concessional loans and grants to fund investments that more broadly benefit the world, such as helping countries transition away from coal power.
- Yellen said the World Bank and other multilateral development banks (MDBs) need to adopt stronger targets for mobilizing private finance and deploy a broader range of instruments, including loan guarantees and insurance products.
- On macroeconomic issues, Yellen said the top priority for countries facing high inflation was to return to an environment of stable prices - a fight she said was primarily the responsibility of central banks.
Our View on Yellen’s statement: The reality is that Asia and Africa are bearing the cost of Ukraine and extreme monetary policies followed by G7 central banks in pre covid times as well as post covid years. The US dollar’s may be supreme right now. Nations are taking measures to reduce reliance on the US dollar and focus on regional trade and regional currencies. The impact will be felt from 2024 and not next year. Peak US dollar will be till 2024 and thereafter a big decline.
Allowing free entry and exit of private capital (with zero controls) as demanded by Yellen will imply nations being held to a ransom by private capital providers. A nation will give up its sovereignty to private capital providers if it allows zero control exit and entry.
Yellen statement and her real intent makes me believe that we should all increase allocation to physical gold. A fifteen percent of long-term investment (ten years and more) should be invested in physical gold.
- Key support: $1695.00 and $1704
- Key intraday resistance: $1729.00 and $1746.20
- Spot gold needs to trade over $1707 to rise to $1729.00 and $1759.
- Gold will crash only if it does not break $1736 today.
- Gold will rise very quickly if it trades over $1720.00 today and more so after NFP.
MCX SILVER DECEMBER 2022 – current market price Rs.61612
- 200 day moving average: Rs.61272.00
- 300 day moving average: Rs.61800.00.
- 100 day moving average: Rs.57886.00.
- MCX silver December has to trade over Rs.60562.00 till next week to be in a short term bullish zone and rise to Rs.63539 and Rs.64678.
- Silver will crash only if it trades below Rs.60562.00 after NFP.
- Overall, all price fall upto Rs.57886 (one hundred day moving average) will be a part and parcel of the bullish trend and should be used to invest with higher trailing stop loss.
(price in Usd/inr above)
MCX COPPER OCTOBER – current market price Rs.653.30
- 50 day MA: Rs.653.20
- 100 day MA: Rs.682.80.
- MCX Copper October needs to trade over Rs.647.30 to rise to Rs.665.40 and Rs.682.80.
- There will be another wave of sell off if copper trades below Rs.647.30 today and more so after NFP to Rs.637.10 and Rs.623.00.
(price in Usd/inr above)