bullion intraday

Bullions
22 May 2008 10:33:21



Bullion

Major Headlines:

Gold traded above $930 per ounce, following its near $12 rally the previous day, with mounting concerns over rising inflation keeping the precious metal well supported. Oil prices jumped to a fresh record high above $132 a barrel this morning, its encouraged investors to buy into bullion as a means of hedging against the effects of rising fuel costs.

Weakness in the U.S. dollar is also providing support to gold, as the precious metal serves as an alternative to the most dominant form of foreign currency reserves, and the interest rate differential between Europe and the US keeps the dollar under pressure and the correlation between oil and euro-dollar has steadily increased over recent years with the cheerleaders of the ECB's inflation dogmatic approach providing the intellectual reasoning for this correlation

Precious metals rallied after a report showed U.S. stockpiles of crude oil unexpectedly dropped, sending the price to more than $132 in New York for this first time. Crude has risen 99 percent in the past year. Heating oil also reached a record yesterday

Gold demand dropped to a five-year low in the first quarter as record prices and a slowing U.S. economy reduced purchases in every application for the metal except investment funds, the producer-funded World Gold Council said,

However, rising inflation fears in the United States could force the Federal Reserve to draw a halt to its interest rate cutting cycle, which may boost the dollar, and weigh on gold. Gains in gold are also being capped by a steep drop in demand from physical investors in the metal, with gold prices increasing by more than $200 per ounce over the last year

Gold demand dropped to a five-year low in the first quarter as record prices and a slowing U.S. economy reduced purchases in every application for the metal except investment funds, the producer-funded World Gold Council said,

Global use of 701.3 metric tons in the first quarter, down 16 percent from a year earlier, was the lowest since the start of 2003, the London-based council said in a report. The only growth was in China, Russia, Vietnam and Egypt. In India, the biggest user, consumption fell 50 percent.

U.S.Economy:

US BUDGET: The House is set to consider a Democratic-drafted fiscal year 2009 budget resolution that purports to bring the federal budget into balance and generate small surpluses in 2012 and 2013

Currencies update:

The ECB has kept its rate at a six-year high of 4 percent since last June and is widely anticipated to maintain its rate until the end of the year as inflation concerns remain to the fore. The single currency has been underpinned of late by hawkish comments from the ECB, which continues to sound worried about inflation.

Last week, ECB president Jean-Claude Trichet said the central bank must be extraordinarily attentive" to inflation and that it "is paying particularly close attention to wage negotiations in the euro area".

MCX Gold June (Daily Chart)

Technical Outlook:The daily stochastic have crossed over up which is a bullish indication. The stochastic indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day EMA. The downside closing price reversal on the daily chart is somewhat negative.

Market is expected to remain positive and the resistance is seen at 12913 levels. If market breaches12913 may see prices to take further upside towards 12995 and 13146 however if it holds back below 12680 may see prices to fall further on today. Major support is seen at 12529 and 12447

Recommendations–MCX Gold June: Buy at 12770 Target 12855 and 12910 Stoploss at 12725

MCX Silver July (Daily Chart)

Technical Outlook: The daily stochastic have crossed over up which is a bullish indication. The stochastic indicators are rising from oversold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 9-day EMA. The downside closing price reversal on the daily chart is somewhat negative.

Market is expected to remain positive and the resistance is seen at 25053 levels. If market breaches 25053 may see prices to take further upside towards 25267 and 25643 however if it holds back below 24463 may see prices to fall further on today. Major support is seen at 24087 and 23873

Recommendations-MCX Silver July: Buy at 24740 Target 24920 and 25140 Stop loss at 24590

MCXARUN
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