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In Wednesday's Asian session, base metals are trading up by 0.2 to 0.5 percent except Nickel and Lead. Equities are mostly down for the fourth consecutive day, as the macro-economic picture remains anemic. Though, the Japan s trade balance increased unexpectedly still the equities have failed to gain indicating the bearishness.
Further, IMF stated significant downside risks persist in China as the economy is prone to investment while consumption have failed to improve and may continue to weaken metals pack in today’s session as China is the largest consumer of industrial metals. From Europe, the Spanish bond yields are maintaining at unsustainable levels while the shared currency of the block has touched a two years low yesterday. The sovereign debt crisis is likely to further support downside as banking recapitalization and full bailout is beyond reach of present economic developments and summits.
Hopes of easing by the Bank of Japan has supported commodity prices including base metals, however weak US data is likely to weigh on gains in today’s session. The economic releases scheduled for the day from Germany in the form of IFO confidence numbers may likely further deteriorate and may weaken the Euro extending losses to metals pack.
The UK GDP is also likely to remain weak on the back of slowing European neighbors and may further support downside.
The US mortgage applications may remain at a blend while the new home sales are also likely to remain weak and may continue the downtrend.
Precious metals are expected to be weak in today's session on the problems in the Eurozone.
Gold again remained resilient to the market news and made it pretty inelastic to break the level of $1560-1590. Today morning however prices got a push at the early Globex although the Asian shares are hammered after reports showed Greece needs to be restructured. This would put more strain on the ECB and raised worries about the European economy. With this backdrop, the Spanish bond yields are again at a record high of 7.65%. However, the shared currency might have taken a mere pull back at the moment as it fell below its support of 1.2100 and thereby supporting the metal.
Expect the currency to pare its earlier gain throughout the day as the German IFO numbers seem to remain negative. There is no reason for gold to stay at an elevated price level except its demand as a safe haven. Later today, the US new home sales may improve and that may provide little support to the dollar index. Gold will then to come under pressure. However, again the level of $1560-1590 should be watch out for. Traders need to see a break above or below this congestion level to support increased volume.
Silver prices have also given a slight pull back at the early trade. Yet, we expect the euro’s gain to be short lived and that may drag the metal down during the European hours. As discussed in gold’s outlook, there is no reason for silver to stay at an elevated level. The level of $26.50, a major support should be watch out for.