Today is a big day for gold, silver, copper and all base metals apart from US dollar index. One needs to look at the unemployment rate and labor participation rate in the US June nonfarm payroll numbers. (X) A sharp fall in the unemployment rate will increase the cause for a September interest rate hike by over 0.50%. (XI) A sharp rise in June unemployment rate will imply job losses and increase the chance of a 0.50% interest rate hike on 27th July FOMC meeting.
The question is when and how the Federal Reserve and other central banks will act to mitigate recession or recession fears. In Europe, I am seeing subsidies being announced for people to get over the higher cost of living. Indirect stimulus is being announced by every nation in Europe. The nationalism of entities that benefits the masses (like electricity supply, rail transport etc) is rising all over Europe. In my view Federal Reserve is expected to act from October once the American summer gets over.
The pace of contraction of global liquidity will fall from August. This makes me believe that July is the month to invest for Christmas in base metals, stocks and precious metals and even crypto currencies. Buying December naked call options in all asset class is the cheapest and least risky investment strategy.
China Considers $220 Billion Stimulus With Unprecedented Bond Sales
China’s Ministry of Finance is considering allowing local governments to sell 1.5 trillion yuan ($220 billion) of special bonds in the second half of this year, an unprecedented acceleration of infrastructure funding aimed at shoring up the country’s beleaguered economy. The bond sales would be brought forward from next year’s quota. It would mark the first time the issuance has been fast-tracked in this way, underscoring growing concerns in Beijing over the dire state of the world’s second-largest economy. “It has been clear for sometime that local governments need more money. The news today suggest that the central government is still unwilling to expand its own balance sheet, and instead let local governments to bring borrowing quota from 2023, which means a fiscal cliff next year,”. (news source: Bloomberg.com)
Our View: Chinese domestic demand will impact base metals and precious metals. Chinese economy can consolidate in this quarter. If China is covid lockdown free from Q4, then Chinese local consumption will beat even the highest of the street expectation. The world will be looking at the Chinese growth trajectory for the rest of the year and into Q1 of next year.
Key US economic data releases today : June Non farm payrolls
I expect the headline number to be higher. It will be a technical trade after ninety minutes from the release of NFP numbers. One needs to trade very carefully in the first ninety minutes after the release of June NFP numbers.
Spot Silver: (current market price $19.19)
- Key intraday supports: $18.18 and $18.75
- Key intraday resistances: $19.76 and 20.33
- Silver has to trade over $18.45-$18.65 zone till next week to be rise to $20.33 and $21.40.
- Silver will crash only if it trades below $18.45 till next week.
MCX SILVER SEPTEMBER 2022 (current market price Rs. 56863.00)
- Key intraday support: Rs.55481 and Rs.56182.00
- Key intraday resistance: Rs.57215.00 and Rs.57736
- MCX silver September has to trade over Rs.56182 to rise to Rs.57736 and Rs.58237.
- MCX silver will crash only if it trades below Rs.56182 after the release of US June non-farm payrolls and days close.
- MCX silver is not yet out of the bearish shadow yet. Technically oversold.
(prices are in Indian rupees above)
Gold and silver physical buyers are absent due to cyclical factors. Gold and silver prices have to show a trend reversal to bullish to attract short term investment demand and short covering. If not then, then there will be sellers on rise.
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