bullion intraday

Bullion: Gold market in a rally mode
12 June 2008 11:03:13

Gold rose for the first time this week after the euro rebounded against the dollar, boosting the appeal of the precious metal as an alternative investment. Silver also gained.

The dollar fell against the euro on speculation the European Central Bank will raise interest rates in the next month, widening the gap in borrowing costs with the U.S. The dollar gained 2 percent against the euro in the previous two sessions. Gold has climbed 34 percent in the past year as the euro rose 16 percent against the dollar

Platinum and palladium rose as crude-oil futures gained. rising oil prices typically fuel inflation concerns. The metals are used to make jewelry as well as emissions- control parts for gasoline and diesel engines. Some investors buy the futures and other commodities priced in dollars to preserve value when the currency declines

Gold will continue to track the value of the U.S. dollar versus the other major currencies. Any significant weakening of the greenback would likely find the gold market in a rally mode, while any solid strength in the U.S. currency would find gold prices under more selling pressure.

Also significant and a bearish clue is the fact that gold prices the past few weeks have not closely tracked the crude oil futures market. Crude oil prices last week hit a fresh all-time high as this market has been trending higher since the beginning of the year. As the crude market has trended higher the gold market has trended lower. The divergent price path of these previously close allies is a very worrisome development for the gold market bulls.

Signatories to the Central Bank Gold Agreement have been selling far less gold than they are allowed to on an average weekly basis if they are to sell their full allotment of gold by September, says the Gartman Letter. "The bulls would argue that this means they've exhausted their gold sales; the bears will argue that that means they've a huge store of gold to sell through the remainder of the summer into the end of September when the Agreement ends," it notes. A maximum of 500 tons can be sold by signatories in any agreement year

U.S.Economy:

Federal Reserve Chairman Bernanke said in a speech last night at an economic conference in Boston that "growth risks remain to the downside," but the Fed "will strongly resist an erosion of longer-term inflation expectations..." The speech was seen as hawkish support for the dollar.

The June 2009 Eurodollars are trading higher ahead of this afternoon's Beige Book report from the Federal Reserve.

Currencies update:

Japan's Cabinet Office said that real GDP was up 1.0% in the first quarter of 2008 and up 1.6% from a year ago. Also, the Bank of Japan said that producer prices were up 4.7% in May from a year ago, the biggest jump in 27 years.

The U.K.'s Office for National Statistics said that the unemployment rate for February to April was up .1 from a month ago to 5.3%.

Statistics Canada said that industrial capacity dropped from 81.8% to 79.8% in the first quarter of 2008, the lowest in 15 years.

The Reserve Bank of India increased its interest rate from 7.75% to 8.00% in an effort to restrain inflation.

MCX Gold June - Technical Outlook:

The daily stochastic have crossed over down which is a bearish indication. The stochastic indicators are decreasing from overbought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 9-day EMA. The upside closing price reversal on the daily chart is somewhat positive.

Technicals have turned neutral to sideways and market is expected to remain positive above 12280 levels. If sustain above this level can see a rally towards 12355 and 12438 If market sustains below 12145 can see a further fall towards 12065 and 11935

Recommendations–MCX Gold Aug: Sell at 12355 Target 12270 and 12140 Stoploss at 12405

MCX Silver July - Technical Outlook:

The daily stochastic have crossed over down which is a bearish indication. The stochastic indicators are decreasing from overbought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 9-day EMA. The upside closing price reversal on the daily chart is somewhat positive.

Technicals have turned neutral to sideways and market is expected to remain positive above 24025.00 levels. If sustain above this level can see a rally towards 24210 and 24550 If market sustains below 23685 can see a further fall towards 23500 and 23160

Recommendations-MCX Silver July: Sell at 24220 Target 23980 and 23700 stoploss at 24410

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