Last Updated : March 17, 2010 05:45
Rising interest rates to fuel demand for gold, silver
Gold Gold dipped to $1,101.15/oz in early US trading before recovering to close with a gain of 0.37% despite continuing dollar strength. It rose in Asian trading and has range traded from $1,109/oz to $1,113.50/oz so far in European trading this morning. Gold is currently trading at $1,114.00/oz and in euro and GBP terms, gold is trading at €813/oz and £739/oz respectively.
Gold may challenge resistance at $1,119/oz and above that is resistance at $1,128/oz. Technical support is at $1,100/oz and recent action is leading to increasing confidence that gold will remain above the psychological level of $1,000/oz for the foreseeable future.
Asian equity markets were mixed but Europe's have gotten off to a positive start. Markets await the Federal Reserve rates decision and FOMC statement later today and they should provide direction. Debate is heating up within the Federal Reserve over how and when to signal that the days of record-low interest rates are numbered. Federal Reserve Chairman Ben Bernanke and his colleagues may soon communicate subtly that higher rates are coming once the economic recovery is on a firmer footing. There is a growing realization that Fed policymakers will soon need to start increasing rates to head off inflation and protect the value of the dollar and the US' credit rating.
In the short term an increase in interest rates could be negative for gold. But, in the medium to long term rising interest rates are likely to be positive for gold as they were in the 1970s. When interest rates return to more normal levels (above 5%) then gold would be vulnerable to a correction as savers and bondholders become enticed by higher yields.
We are a long way from there yet and gold is likely to be correlated with rising interest rates and only fall towards the end of the interest rate hiking cycle. It is worth remembering that the 1970s gold bull market only ended with interest rates close to 20%. Also rising interest rates are not positive for equities and property and volatility and or further falls in these asset classes could lead to further safe haven demand for gold.
Silver Silver has range traded from $17.14/oz to $17.28/oz this morning in Asia. Silver is currently trading at $17.27/oz, €12.61/oz and £11.46/oz.
Platinum Group Metals Platinum is trading at $1,626/oz and palladium is currently trading at $465/oz. Rhodium is at $2,535/oz.
MCX Refined Soy Oil 15 March 2012
contract was trading at
Rs 683 . What's your view on it?
