The main causes for the increase in commodity prices are continued sabre rattling by the U.S. and Israel against Iran, the inability for the European Union to resolve its sovereign debt problems, and the continuing increase in the U.S. debt.
The increase in oil and gas prices is due to the fear that there will be a supply disruption in the oil markets if the U.S. or Israel attacks Iran. Iran is the second largest produce of Crude Oil in the world next to Saudi Arabia. The U.S. imposed sanctions to cut off Iran's access to U.S. banks which are essential to the international buying and selling of Iran's oil.
The increase in precious metals such as Gold and Silver is due to a combination of flight to safety in the event of another war in the middle east along with increased sovereign debt in the U.S. and Europe which makes their currencies devalue against precious metals.
Bullion desk prices broke the upper range as concerns hovered that a second bailout for Greece will not be enough to end the European debt crisis which was than supported by Fitch downgrade of Greece to C.
Gold rose to trade above $1770 on the back of weaker Manufacturing Details of Eurozone as well as China. Holdings in Deutsche Bank’s physical Gold exchange‐traded funds increased 14,277 ounces to 1,078,656 ounces as of Feb. 21.
For the day coming by we expect bullion desk to trade higher on the back of high heaven demand concerning European crisis.
Courtesy: Edelweiss Comtrade Limited Research
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