Gold and Silver Expectations

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U.S. markets closed for the Independence Day holiday.

Early morning the Chinese services PMI further deteriorated indicating weak economic activity and supported weak price performance of metals pack.

However, the total vehicles sales increased in US with better demand for domestic cars indicated growing optimism and may provide gains in today’s session. Trading is expected to remain cautious ahead of a European Central Bank meeting on Thursday, which may now have to produce more than a sharp interest rate cut to ease market doubts over the ECB rescue fund’s ability to lower borrowing costs for indebted members such as Spain and Italy. From the economic data front, the eurozone and German PMI numbers along with that of UK are likely to remain at a blend while the retail sales numbers may improve slightly after hitting rock bottom in May.

Therefore the metals pack may remain on the gaining side in today’s session due to positive releases coupled with speculation over rate cut and strong equities.

After a surge above $1600 level in overseas trading, gold prices have recessed at the early session. A slight fall however is not a matter of concern now. Asian equities have extended rally taking cues from the overseas and support lent by a surprise lift in US factory orders. The euro however has drifted a little owing to some argument regarding the ECB decision at this shortened trading week. The US markets will be closed for the Independence

Market may remain dull. Nevertheless, flared up expectation on ECB cutting its reference rate by 25bps would certainly be the talk of the town now. With an amalgamation of EU summit last week, ECB’s step is indeed apt for this time. Despite the eurozone PMI numbers may remain slight weak today the euro would have taken a back seat for the time being, but as said above, the shared currency is having a potential for rally underpinned by rising expectation of central bank easing. Anticipation of the same helped reduce the borrowing cost for Spain and Italy, nations who were at the seam of default rate. All these are indicating a stronger the euro for the day and hence gold is also expected to cover the early losses. Said so, we expect gold to draw support from the euro and hoisted likelihood of some supplementary aid from the Fed after awful ISM figure later this month. Hence, we recommend staying long for the metal from lower level.

Silver prices have also made a slight dip at the early trading although the Asian equities have rallied taking cues from the overseas and sentiment remaining bullish globally. Despite the eurozone PMI numbers may remain slight weak today, the euro would have taken a back seat for the time being, but as said above, the shared currency is having a potential for rally underpinned by rising expectation of central bank easing. Anticipation of the same helped reduce the borrowing cost for Spain and Italy, nations who were at the seam of default rate. All these are indicating a stronger euro for the day and therefore silver is also expected to cover the early losses.

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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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