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Asian Metals Market Update: What if CPI falls significantly?

If gold and silver rise today and tomorrow, then they will not stop before $1960 and $25.00. A short covering rally plus technical breakout plus new short-term hot money will imply a minimum five percent rise in the short term. The reverse will happen only if stocks plunge and move into a short-term bearish phase.

Copper and industrial metals are bullish. But copper needs to trade over $7950 till next week to jump-start the quick rise to $9000. Aluminum and zinc are bullish on fears of reduced supplies from Europe and nations upgrading electricity infrastructure due to rising temperatures worldwide. One should use nickel’s fall in the next one month to aggressively buy physical. Nickel can start rising anytime any moment in the next thirty days.

My question to myself is “If July inflation (consumer price index and producer price index) falls significantly, then will the Federal Reserve still raise interest rates by 0.75% in its September meeting? “  The chance of a 0.50% interest rate hike will be high as opposed to the current expectation of 0.75%. All asset classes except US dollar Index and bond yields will rise. There will be a technical breakout.

A higher July CPI and PPI numbers will justify 0.75% interest rate hike for September meeting. Crash or sell-off in precious metals, base metals, and stocks will be there only if there is a technical breakdown. Even a failure to break key resistances also will cause a sell-off in precious metals and base metals.

Irrespective of the July inflation numbers, if the Federal Reserve officials say directly of a 0.75% interest rate hike next month, then there will be temporary sell-off in precious metals and base metals.

Crude oil will be very volatile as traders assess the impact of Russia stopping supplies to Europe. Iran and the progress/lack of progress of nuclear talks will increase intraday volatility.

Spot Silver: (current market price $20.43)

  • Key intraday supports: $20.12
  • Key intraday resistances: $20.91
  • Silver can rise to $21.36 and $22.20 as long as it trades over $19.87.
  • Use a buy on crash strategy with a stop loss below $19.67 for next week.
  • Silver will rise very quickly if it trades over $20.70 after CPI.

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