Bernanke Freezes Gold & Silver

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This morning markets are more or less frozen ahead of Mr. Bernanke’s address later today, base metals are trading mixed with Aluminum and Zinc slightly down while other metals are marginally up at LME The Asian markets are trading down after eco data released in Japan showed industrial production of remained weak along with vehicle production and may likely continue to pair in gains in base metals.

Presently, markets are likely to focus on the Fed Chairman’s Jackson Hole symposium and any comments from the Central chief may turn the metals pack. Fundamentally, downstream demand has remained weak along with trader participation and may likely continue to support downside in today’s session.

From the economic data front, the German retail sales and US factory orders are the only two supportive data for today’s session while the other indicators are likely to support downside. The Euro-zone unemployment is likely to increase due to prolonged slowdown in the member nations and may pressurize the shared currency extending weakness to base metals. Expect base metals to remain slightly sluggish during the day and may decline as the Fed may hint no QE – 3 and may continue with near zero interest rate till 2015. This may strengthen the dollar against a basket of currencies and may diminish returns to other country buyers.

Optimism of the Fed introducing easing enabled a market rally last week but gradually the confidence faded after US economic releases came in better than estimated.  As soon as Mr. Bernanke is complete regardless of the outcome, traders will turn their focus to Spain and Greece, and will pressure the euro, which will weigh on gold.

Gold as well remains on a mild corrective mode in early electronic trading while Asian equities slipped led by the Japanese bourses after the regional industrial production dropped unexpectedly. At present although the euro is showing little firmness, probably eyeing the improved German retail sales, expect the shared currency to pare the gains throughout the day. Because the Spanish Prime Minister delays in seeking bailout for Spain while its regions are continuously urging for aids, this is rapid turning sentiment against the euro and the EU.

Silver futures prices have hardly seen in any change at all.  Moreover, Japanese retail sales fell unexpectedly which may also create pressure on the metal. All eyes will be on the Jackson Hole Symposium wherein we expect no announcement of easing.

Expect precious metals to fall after Mr. Bernanke’s address and the euro to decline rapidly against the USD.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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