Bullion afftected by weaknes in crdue and recovery in US Dollar

Bullion may get pressure due to strong dollar and weakness in crude oil, major dips can be used as buying opportunities.

Strong Dollar:

Dollar fought back yesterday on the back of strong rally in the stock markets, pullback in oil prices, and a stronger than expected CPI reading but the momentum is so far mild. Fed minutes might sound a bit more hawkish than Bernanke's testimony, noting that some committee members said that some firming in policy would be appropriate very soon? to fight inflation. Nevertheless, markets are not that convinced yet with interest rates futures showing 41% chance of a hike by Dec, down from 44% a week ago.

Weakness in Crude Oil

Oil prices plunged four dollars on Wednesday, extending this week's spectacular losses after a surprise jump in crude reserves in the United States, traders said. Prices had already tumbled Tuesday in the biggest fall in 17 years amid rising concerns about sluggish US economic growth that could dampen global demand for crude oil. Prices fell on news of a build in US crude oil reserves. The US Energy Information Administration said inventories rose by 3.0 million barrels to 296.9 million barrels in the week ending July 11, confounding market expectations of a decline of 2.2 million barrels. However, the decline in oil prices from last Friday's record high levels above 147 dollars may be short-lived, analysts said, noting that the increase in US energy stockpiles reflected slowing demand in a sluggish US economy, the world's largest energy consumer. According to the US government, Americans consumption of petroleum products fell two percent over the past four weeks, compared with the same period a year ago.A sudden shift in US diplomatic policy toward Iran announced late Tuesday also eased oil supply concerns, analysts said.

Impact and Analysis:

Bullion getting pressure from both news and may push more down if crude oil retreats, but these drops always can use for buying as bullions are still very bullish for longer term can break all time high in international markets.

Regards

Kamlesh Jogi

Commodities Research Analyst