CALMNESS BEFORE THE BIG MOVE IN GOLD AND SILVER : RSBL

rsbl_silver_gold

In order to understand why I have given this title for the week’s blog, I would like you to have a look at the price movements in the below charts of Gold and Silver:
gold-price-chart_rsbl-spot-terminal
Gold price range: RSBL SPOT Terminal
silver-price-chart_rsbl-spot-terminal
Silver price range: RSBL SPOT Terminal
If you see the above 2 charts of the price movements in Gold and Silver for the week (courtesy: RSBL SPOT terminal), you would agree with me that the price movements are identical. I would even look forward to quote it as same. That’s how these 2 metals are coupled with each other.

In the third week of May, both the metals hit their key resistance and fell while last week both of them hit their key support and now have stabilized in their month on month trading range.

With the amount of news flow reducing, physical support dying out, these metals are just trying to stay up float. For the last week I saw more news coming from physical demand of these metals:

1. According to BBG, China’s net Gold imports from Hong Kong fell for a third month as buyers deferred purchases in anticipation of further price drops and amid increasing government scrutiny of bullion trading. Net inbound shipments dropped to 46.6 metric tons last month from 61.8 tons in March and 65.4 tons a year earlier, according to data compiled by the Hong Kong Census and Statistics Department.

2. Switzerland exported 143.9 tons of gold in April which is 36% less than March. More startling were the exports to China which were down 67% to just 15.1 tons.

Judging from the physical demand shrinkage of the metals, I feel that these prices are not so inspiring for investors to invest in them.

Economic news from US showed:

  • GDP figure contracted in Q1, hurt by Frigid winter and a debilitating West coast port strike.
  • The Chicago PMI tumbled in May to 46.2 (53.0 expected), reversing all the gain recorded in April (52.3 April).
  • Initial unemployment claims in the U.S. edged up from 275k to 282k in the week ended May 23 (270k expected).  Despite the latest increase, the level of claims remains extremely low by historical standards which is positive

When it comes to technical levels: US$ 1180 of Gold and US $16.70 acts as a fortress for these metals. Until the prices do not breach these levels, I feel that the ongoing range specific price movements is a part of a calm sea which could induce violent storms in no time for the next big move.

Things to watch out for in this week are:
1. News about Greece payments to IMF – All week
2. ISM Non-Manufacturing PMI – Monday
3. ADP Non-Farm Employment Change – Wednesday
4. ECB Press Conference – Wednesday
5. Non Farm Payrolls data – Friday

TRADE RANGE:

METAL INTERNATIONAL DOMESTIC
GOLD $1181 – $1238 an ounce Rs.26,600 – Rs.28,300 per 10g
SILVER $16.70 – $18.00 an ounce Rs.38,500 – Rs.42,000 per kg

The primary purpose of this blog by Prithviraj Kothari – MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”

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