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London Bullion Report

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Gold finds support ahead of $875, platinum dips overnight

Fri, May 30 2008, 06:36 GMT
by James Moore

The Bullion Desk


London, 30 May 2008 - Risk reduction weighed heavily on the commodities yesterday with the CRB Index falling 2.5% and the GSCI losing 3%. Oil did show initial resilience, with July futures spiking to $133.12 after data showed a drop in US inventories, however selling pressure dragged crude down to $126.62 by the close, a fall of $4.41/barrel. Speculation of a narrowing in the Eurozone/US rate differential, coupled with improved growth data from the US kept dollar sentiment in bullish mood with EUR/USD posting a low of 1.5484 before settling at 1.5505. Economic data is plentiful today with the line-up including Personal Incomes, Consumer Spending and Core PCE Index for April as well as Chicago PMI & Consumer Sentiment for May.

Gold held in a tight band around $900 in Asia before drifting gradually lower once trade got underway in Europe as the dollar began to firm. Initial support was found ahead of $890 however the improved GDP reading triggered a break lower, with gold trading initially to $879 before sliding to a 2-week low of $873.25. Bargain hunters allowed gold to close off its lows at $877.20, and the move below $900/oz is likely to be viewed favourably by the physical sector, particularly in India as post-festival re-stocking is carried out. While an end of week or data related bounce can’t be ruled out today, given the improved dollar sentiment and the general view that commodities are perhaps a little overbought it’s likely that short-term sentiment will remain bearish. Strong chart and psychological support is expected between $860 and $850 although the metal could re-test the $845 lows seen earlier in the month.

Gold

Following gold’s lead silver fell 5.25% yesterday to a low of $16.49. The metal closed at $16.64 and is likely to find good support around $16.50. A break lower should find chart support at $16 and around the 200-day MA ($15.75), although given the metals volatility a deeper correction could be brewing.

Silver

Despite the metals bullish fundamentals platinum broke below $2000/oz yesterday, falling 4.4% to a low of $1976. After closing at $1988 the white metal has moved lower overnight with selling from both OTC and TOCOM players. Platinum has now entered an area of more substantial chart support with industrial as well as investment players likely to view the correction below $2000 favourably.

Platinum

Palladium closed down $10 yesterday at $422. Support below should be found at $416/408.

Palladium


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