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London Bullion Report

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Gold trades below $920/oz as oil correction deepens

Thu, Jul 24 2008, 08:16 GMT
by James Moore

The Bullion Desk


London, 24 July 2008 - More bullish dollar tones and reduced inflation demand have prompted further long liquidation across the precious complex over the past 24-hours, with gold trading to a 2-week low, silver to a 3-weeks low, while both platinum and palladium have slumped to 5½ month lows after breaking technical support. EUR/USD closed yesterday at 1.5689 and has met resistance at the 1.57 level this morning ahead of data showing Jobless Claims for the week of July 19th and Existing US Home Sales for June. Crude oil lost a further 3% yesterday, closing down $3.98 at $124.44/barrel. September futures are currently up 68-cents.

After a steady start in Asia gold broke lower on Wednesday’s European opening, dropping below $945 and eventually trading down to $932 before sufficient support emerged. Bargain hunters helped the metal stage somewhat of a recovery, reaching $944.25 shortly after the US opening but the market quickly u-turned as oil gapped lower. Technical stops below $932 accelerated gold’s decline with the metal posting a low of $921.90 in floor trade and testing below $920 in after-market trade. Offers overnight have led gold to a 2-week low of $916.75 but despite the risk of further selling pressure the metal has now entered an area of more substantial support with the 100 & 40-day MA’s located at $916.20/915.20 and chart line support pegged at $908/904.50. While open interest data from COMEX today is likely to show substantial liquidation the most up to date ETF data has shown only a modest decline in holdings, again suggesting longer-term investor prefer some form of safe-haven type asset within their portfolio.

Gold

Silver tracked the gold market lower yesterday although found good scaled down support across the day. The metal closed at $17.47 and has dipped to $17.28 this morning, and further pressure could see a challenge of chart support at $17.20/16.95. Overall silver appears comfortable within the broad $16.50-18.50 range, and as with gold investment demand remains firm with holdings in the largest ETF up almost 1.5M/ozs this week.

Silver

Strike news from South African failed to halt the slump in PGM prices yesterday as both platinum and palladium tumbled to 5½ month lows. Platinum has touched $1710 this morning while palladium has traded to $373 amidst speculation that economic slowdown will cut demand from automakers. The current level of volatility within the market may have dissuaded some bargain hunters, who may now look for more stable prices before buying, but with platinum still facing a substantial supply deficit we would be surprised if the current correction were to be viewed as a selling, rather than a buying opportunity. Chart support is now pegged at $1685/1660 in platinum and $374/368 in palladium.

Platinum   


Palladium

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