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Gold will collapse to test $ 1145, if China & India Slowdown its Purchase – April 15-19

April 15, 2013
GOLD @ $ 1481 = I did give an early warning a day early after the reports appearing that Cyprus will have to to off load its gold holdings to meet bailout funding requirement. I consider this as an extremely dangerous development because majority of the countries laden with debt have a sizable amount of gold holdings and it is now obvious that taxpayers are unhappy as their money is not being used for any constructive purpose. Its is Germany’s Chancellor Merkel that have been spending lavishly German taxpayers money. I think she will have to face the music in coming election due in September this year. 
Overall nearly 18 pct of the world gold holdings is with the Central Banks and this could be the 1st sign of willingness by the authorities to allow countries with large debt to sell gold from their reserves. 
Though it is too early to talk in detail about the possible future trend, but the current fall is certainly a jolt to the Bulls. There are quite a few factors that goes against gold. Hedge funds, banks and financial institutions are making downward adjustment of gold price. Though Europe is still in a mess, but the European currency does not face the threat of collapse. It is know a known fact that FED is coming up with a strategy to unwind its asset buying program and US economy will surely do well in coming months. The big daddies (hedge funds) did learn a good lesson and may not have enough strength to come up with a rescue plan to halt gold’s decline
Elsewhere, India faced with rising deficit and was forced to increase duty on gold to discourage gold buying. And believe me China is no goof as projected by the West. They are into vendor financing business by providing liquidity to USA. So they are smart enough to understand the trend and they must be aware that this is not the appropriate time to buy gold. I am expecting them to be on the sideline and watch like a silent spectator and allow the price to fall further. Imagine that if China and India, two major buyers of gold that roughly consumes 40 pct of the gold produced annually stays away from gold buying where would the price be heading. Though both the country’s are faced with different situation. Gold purchase is sustainable for the Chinese economy, but India is faced with high deficit due to its annual oil purchase of nearly $ 135 billion and hence, it cannot afford the luxury to foot annual bill of USD 60-65 billion for its gold purchase. Indian economy like other nations is suffering due to global slowdown, but foreign remittances of over USD 60 received annually is a major support to its economy.  
With above developments that I have mentioned, I am of strong view that if China and India slowdown its purchase of gold then in medium term to long term gold should further collapse towards $ 1145. On the up I do not see gold moving beyond $ 1650-80 levels, as there are no major threats.  
Meanwhile, I am expecting Gold to trade between $ 1450 and $ 1560 band for next few weeks. Choppy trade will be seen on Monday, Gold is likely to find support around $ 1460-65 before making up move towards $ 1510 and could possible stretch up to $ 1520-25 levels. However, fall extend towards $ 1410 if support $ 1445-50, surrenders, which is not likely to happen this week.  
EURO @ 1.3111 = Last week’s sluggish US economic indicators must be cause of concern. Friday’s drop in  retail sales gave another jolt, as fall could have been due decrease in spending caused by warm weather. Tax hike could be another possibility that may have spoiled the data and there is a risk that it may have spill over effect due to tax hike and slow job growth that could discourage spendings. Sequester is surly having some sort of impact on the economy and therefore, all eyes will be on next week’s release of CPI, Industrial Production and Housing Starts Data.
However, on Monday China’s GDP should set the tone for the week and strength of Aussie will be further determined with RBA minutes due on the following day. ON Wednesday BOE minutes and FED Beige Book. On Thursday apart from UK retail sale, US jobless claims and Philly data will tell us about the job condition and economic trend in USA. 
On Friday last, Cyprus once again caused nervousness in the financial market after reports that it might need excess bailout funds that initially did not allow Euro to make sharp gains against the US Dollar after poor retail data, but European currency did rally by mid NYK session on belief that it is a minor issue that could be resolved. Euro-regions finance minister will be meeting on Friday to chalk out final required amount required by Cyprus. It remains an unsettled issue due to funding confusion, which will be based on reforms. While Cyprus government has been warned by Mario Draghi not to remove its Central Bank Governor, which could be in violation of EU treaty. So keep a close watch.
I think with all recent developments Bitcoins crashing, Gold plummeting and UK economic uncertainty, Euro looks a better option and could make some more gains this week and therefore, buying on dip is the preferred strategy.  However beyond 150 pip gain from Friday’s close, Euro will become a suspect, as Euro-zone currency is always prone to many risk because the currency is used in 17-Euro zones nation and every country has its own problem. 
Bias for Euro will be on the upside and key support level is 1.3010-20. A move beyond 1.3195-00 is required for a test of 1.3250-80 zones and only break would encourage for 1.3330. failure to hold key support levels would risk for downside test of 1.2920-50 levels. Range for the week 1.2920 – 1.3330 
GBP @ 1.5340 = I am mildly bearish for Cable and only USD weakness would help Pound to make some gains, but will find resistance around 1.5390-10 zones only break will encourage for a test of 1.5430-40 before down again. As i am expecting a fall and break of 1.5280 for 1.5210. Range for the week 1.5170 – 1.5480.
JPY @ 98.32 = Yen gained on weak US retail sale data after missing 100 mark by a whisker. But BOJ’s intention is very clear it will dump liquidity to meet its 2 pct inflation and to beat deflation. I would still prefer choose support levels to sell the Japanese currency.  
Jpy is likely to loose its gloss and may not push beyond 97.70-80 zones. Only break would of this level would encourage for 97.10. However, I am expecting a move above 98.80 that will open gates for 99.50 and break of 100 will encourage for a test of 101.50.  Range for the week 97.10 – 101.80  
AUD @ 1.0505 = Aussie will remain attractive for investors, as I do not signs of immediate rate cut due to the strength of economy and investors would continue to buy AUD on dip. If support 1.0460-70 breaks, 1.0380-90 is unlikely to surrender. On the up break of 1.0555 will encourage for a test and break of 1.0595 for 1.0630. Range for the week 1.0350 – 1.0650
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