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Gold and silver show positive correlation with stocks

24 November 06:35 AM

Something is rotten in the Kingdom of… Germany.Yesterday’s 10-year bond auction disappointed investors. Germany had announced a bond auction for 6B euro. However, investors spent only 3.65B euro on those bonds. The bond yield was equal to 1.98%. This is the worst demand for German bonds since 1999.

Most investors are used to thinking that when the demand for bonds is poor during a certain auction, it is considered a failure. Germany’s central bank, as usual, spent 2B euro on German T-bonds and is planning to resell them in the near future. This is the 9^th consecutive auction with insufficient demand. However, the latest auction showed the lowest demand.

It means Germany will feel more pressure to approve euro bonds, which are expected to replace all the bonds emitted by eurozone members. Jose Manuel Barroso has already approved the idea of introducing euro bonds. There will be calls to use the gold reserves of the eurozone central banks to secure those euro bonds. In public Angela Merkel is still opposing the idea. However, German economic indicators keep declining. Today Germany is to publish its quarterly GDP report.

The US economic performance is also poor. The rate of unemployment is growing, personal spending is declining, thus causing troubles for American retailers.

China’s manufacturing sector is also showing a slowdown. According the Federation of Hong Kong Industries, out of 50.000 Hong Kong businesses located in mainland China roughly 30% of them will be closed or will see production cuts by the end of 2011.

S&P warns Japan about a possible rating cut. Now it is AA- with a negative forecast. Meanwhile, Japanese investment funds transfer their capital form German bonds to British ones, obviously seeing the UK as a European “safe haven”.

As for precious metals, higher risks are expected to provide more growth opportunities, first of all for gold. However, currently gold is positively correlated with stocks.

Forecast: The experts of the Department of Commodity Trading, Masterforex-V Academy, assume that today gold will stay in the 1705-1687 range. Gold seems to continue its downtrend. That is why sales are of higher priority. If the price falls and consolidates below 1691, it will probably reach 1673.

As for silver, if it succeeds in breaking and consolidating above 31.9, it may well hit 32.6. However, Silver is very unlikely to break above 31.9, which means silver will probably head for 31.1-31.16. While the US is celebrating Thanksgiving Day, it is recommended to reduce your exposure or to abstain from trading.

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Negative forecasts for Gazprom’s future have become a routine for analysts and strategists from around the world, including Russia, China, Great Britain and the USA. While some of them can be treated as a means of info wars, most doomsday predictions are so old that they shouldn’t be considered seriously by market participants.

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«Market Leader» - news and previews making you rich.

Stock and commodities markets

Gold and silver show positive correlation with stocks

Gazprom Sees Income Decline. Possible Threats For Russia?

European Stock Indices Go Red

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Asian-Pacific Indices Go Red

European Stock Indices Go Red On Poor Reports

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