Asian Metals Market Update: “Goldilocks” Economic Dilemma For Central Banks

Early indications on Omicron virus suggests that it is hitting the “double vaccinated” more. USA, UK and half the world population is “double vaccinated”. If omicron hits mainly the “double vaccinated” then there will be a global slowdown. The slowdown will not be significant but it will be there. Financial markets will now have to curtail their growth projections for the last quarter of this year and first quarter of next year. Gold and silver and safe havens will rise or remain firm as a result of reduced growth expectations.

All interest rate hikes in the first quarter of next year can get delayed. IMF said that “Omicron” will have global impact on global growth rates. Gold and silver should rise as traders and short term investors increase investment in safe havens like bullion, defensive stocks and cash. Sitting on cash is also a safe haven. Twenty-five percent of short term investment and medium term investment should be on cash till end March. There will buying opportunities (in various asset classes) like we had on Black Friday day. There will be more such days before end of March next year.

I am looking at a “Goldilocks” economic dilemma for central banks next year. Rising inflation and stable to lower growth is an example of “Goldilocks”. Central banks will cannot increase interest rate aggressive (to curb inflation) as it will hurt growth. But nightmarish hyperinflation puts central bank to choose between inflation and growth. “Goldilocks” world (if any) next year will be hyper bullish for gold and bearish for stocks. Around Christmas there will clarity if the world will see “Goldilocks” in the first half of next year or not.

Christmas travel season will get affected. Travel industry cannot afford a slower Christmas growth this year as it can cause some long term damage. Let’s hope that the travel fear factor gets reduced before Christmas. In India I am seeing two things among industries and sectors. Certain industries are increasing their inventories in a big way on “Omicron” virus as they fear supply pressures. Certain cyclical industries have started reducing stocks or hiring (like industries dependent on Indian marriage season and travel) as they prefer to wait to for more clarity on effect of “Omicron”. The net result will be see-saw in short term demand in India in selected sectors. I expect world over this will be the phenomenon.

Back to present day

NFP was as damn squib for bullion traders. Prices started rising only after two hours after the release of the numbers. Technically gold and silver are in a neutral zone. US consumer price inflation number on 10^th December followed by FOMC on 15^th December.

Technical levels of gold and silver to continue its bullish trend

1. Gold (comex gold february 2022 ) has to trade over $1755.20 to be in a bullish zone this week with $1813.20 as key weekly resistance.
2. Silver (comex silver march 2022) has to trade over $2356.00 to be in a bullish zone with $2431 as key weekly resistance.

COMEX SILVER MARCH 2021 (current market price $2251.70)

• Weekly Support: 2069.30, $2110.10 and $2179.10 and $2215.50
• Weekly Resistances: $2317 and $2386
• Bullish View: Silver has to trade over $2100-$2110 zone to rise to $2386 and $2540.
• Bearish trend will be there if silver gets a daily close below 2170 for three consecutive days.

How to trade and invest in 2022

The whole world is still bullish on stocks for the next year. Gold is still not the preferred investment destination. I believe that silver if it crashes more then it will give the best investment opportunity. Industrial metals and energies rose sharply this year on demand fundamentals and supply squeeze. I expect silver to rise in 2022 more on supply squeeze fears than demand. Silver’s long term demand outlook is much brighter than gold. If silver price rises then sell some put options or buy far dated call options. I prefer buying end April 2022 call options in both gold and silver in price crashes for the next four weeks.

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