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Asian Metals Market Update: US Economic Data Releases

Silver should rise to $30.00 before end October or early November. The pace of rise will pickup in silver if it manages to trade over $24.00 over the next two weeks. A daily close over $25.50 for four consecutive days will push silver to $30.00 and much sooner than most of us expect. All industrial metals are seeing an unthinkable parabolic rise except silver. Silver is part an industrial metal and part an inflation hedge. My view is if silver does not fall below $20.00 by 30th November then $50.00 will be there by end January 2022. There will be nothing in between.

Gold will see short covering demand and short term hot money in case it manages to break and trade over $1796-$1805 zone. There is always overshooting from key technical support and key technical resistances due to algo trading. I am bullish on gold as well but for day trading still caution will be needed till $1805 is not broken.

US economic data releases will start from today. It remains to be seen if the same impacts metals and energies. Option traders have betting of $200 crude oil next year. They are not idiots. Brent crude oil has a ten percent chance of rising to $200 by end of next year if coronavirus vanishes and normalcy returns. I see massive labour shortage in India in every sector if coronavirus does not make a comeback in the next four months. This will be everywhere in Asia.

What next for gold after Taper (on 3rd November) and US October nonfarm (NFP) payrolls (on 5th November)?

Gold will surely break free from $1670-$1750-$1840 trading range (for most days of the current year) and form a new trading range after Taper and October US nonfarm payrolls.

Inflation, growth and coronavirus will be the key focus once Taper is done by the Federal Reserve on 3rd November. Money supply reduction measures will not be there by Federal Reserve till the end of first quarter of next year. US bond yields should form a medium term top in the first week November. Bank of England and Asian central banks will raise interest rates from December till the end of first quarter of next year. US Dollar Index will crash and fall below 90.00 as bond yield gap (between USA and rest of the world) starts decreasing. Gold will get a chance to break past $2000 once bond yield gap moving in a falling direction.

Re-election chance is virtually nil for current Federal Reserve chairman Powell due to proprietary trade issues. New chairman next year (if any) can imply lack of policy continuity and rise in short US dollar positions.

I will also closely monitor for changes in US-Eurozone relations. Any rise in unfriendliness between USA and Eurozone will be bullish for gold. Eurozone central banks will increase their gold reserves next year significantly.

Indian Ocean zone is being made another Persian Gulf. The difference is nuclear powers. USA arming Australia with sensitive submarine nuclear technology will only increase the pace of US dollar dumping by nations friendly with China. In the long run gold is the only answer and not crypto currencies to such developments.

Gold will crash or nosedive if and only if Federal Reserve changes its inflation stance of transitory and takes up money supply reduction measures with a sense of urgency to counter inflation and reduce speculative investment in commodities. A mask free world supported by booster dose of covid vaccine will cause a short term slump in gold price.

What next for gold?

Indian physical demand and Indian jewellery demand for gold will form a short term peak by the first week of November. Thereafter demand will be price elastic. A weaker Asian currencies (if energy price continue to rise at current pace then Asian currency will weaken against the greenback for the rest of the year.) will also ensure higher demand on price crash in Asia. Gold ETF demand will also rise sharply (after taper and NFP) if there is a slightest indication that $1800 will be the lower price base for the rest of the year.

However failure to break $1854 by end November will result in a sell off to $1650 and $1550. In case $1854 is not broken (in a sustained way) by end November then short term traders will switch to other investments which covers real inflation. Right now gold return is not covering real inflation. Cryptos and NFT are offering much better returns than gold/silver as on date.

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