Prices of precious and base metals set to remain strong

Even as crude prices are witnessing an erosion in confidence, markets of precious and base metals continue to remain strong.

Leading the charts are gold and silver that have risen swiftly in the past one week, exactly when the price of crude has come down and the euro, one of the strongest global currencies just four months earlier, has plummeted to a level from where a swift recovery is not expected.

Silver has gathered momentum in the past three days. Silver extended its recent rally to reach a high of $19.70 and it ended the open session up 37 cents at $19.62, representing a gain of $2.65 or 15.54 per cent over the past week. It could rise further, said Jeffrey Rhodes, CEO of Dubai-based INTL Commodities. "The price fell back into the mid-$19.40s in aftermarket electronic trading, leaving the long-term resistance pegged at $19.46 intact with chart watchers eyeing a rally to the next main resistance at $21.25 if a clear break above $19.46 is recorded on a closing basis," he said.

Gold, Rhodes said, has gathered steam due to prevailing, and expected crisis deterioration in the euro zone. The bullion that had for the past four months traded in the $1,100 to $1,180 an ounce range, last traded at $1,228.80 an ounce. "Euro zone debt crisis and gold has become the stand out asset class and alternative currency with gold prices euro, Swiss francs and sterling posting record highs," Rhodes said.

However, "trees don't grow to heaven" a cautious Rhodes said. "With India approaching the fallow period where the monsoon season limits physical demand in the world's largest offtake market, gold is vulnerable to the usual summer weakness, although where it would decline from is the big question occupying dealers minds."

Platinum has gained on the back of industrial demand. "Platinum has gained $33 to end at $1,729 on the back of gold's strength and a major rally in the Dow Jones Industrial Average up 148 points with its positive industrial demand implications. The break back above $1,700 is technically positive and chart watchers will now expect a test of key long-term resistance pegged at $1750 with a clear break targeting a price north of $2,000," Rhodes said.

Palladium added $15 to end at $546 on Wednesday, and although the metal's price subsided a bit on Thursday, there are expectations it will rise back to $ 550 to $570 an ounce, Rhodes said.

Francisco Blanch, Head of Commodities Research at Bank of America Merrill Lynch, said in a report the demand for commodities, especially metals, will continue to depend on China. Edward Meir, a senior commodities analyst at MF Global, said copper that last traded at $7,108 a tonne may rise to $7,500 a tonne in the near term.

The price of zinc is also expected to rise in the coming days, MF Global said. The return on investments on zinc has been one of the highest in the past one year, the World Gold Council recently said. "The recent rise was capped at trend line resistance starting from February 2009, for price to resume strength it would have to close above $2,200 a tonne failing which we expect price initially falling towards to $1,930 a tonne."

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