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London Bullion Report

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Gold consolidates as currencies mixed ahead of data

Tue, Aug 26 2008, 06:39 GMT
by James Moore

The Bullion Desk


London, 26 August 2008 - Despite a more than forecast rise in US Home Sales the precious metal spent Monday confined to narrow ranges as a UK Bank Holiday dented market sentiment.
EUR/USD traded 1.4696-4808 across the day although the Euro has drifted lower so far this morning ahead of German confidence data. Economic data today will show US New Homes Sales for July and August Consumer Confidence, which is expected to show a modest rise to 53. Also due for release are the minutes of the last FOMC meeting and German Ifo Business Confidence.
The rangebound sentiment was echoed in the energy complex with NYMEX crude closing up 52-cents at $115.11/barrel.

Despite initial dollar related pressure in Asia gold again remained supported by strong physical demand, forming a base around $817. After a thin European session the metal saw a brief dip to $815.90 but would remain supported by the Euro the remainder of the day. Physical demand has enabled gold to form a good base over the past week, and with equity markets under pressure and credit market liquidity becoming an issue again we may start to see further safe-haven investment demand from longer-term players. Friday’s Commitment of Traders report showed a 56.9-tonne fall in the NC net position in the week till August 19th, while commercial players used the price correction to carry out short covering as well as adding 2M/ozs of longs.

Gold

Silver closed yesterday with a 20-cent loss, settling at $13.37 after running into strong resistance ahead of $13.60. The past week has seen silver stage a technical correction with the RSI rising from an oversold 18 to a more neutral 30, and is currently in the process of base building above $13/oz. The recent correction has drawn further investment demand through the ETF’s, with holdings in the iShare fund rising to a record 208.14M/ozs. Silver has run into an area of more substantial chart resistance, but given the gain in gold we could see silver challenge back towards the 400-day MA ($15.02). COT data for the week till August 19th showed a 22.3M/oz reduction in the NC net long to 157.82M/ozs.

Silver

Platinum finished Monday down $10 at $1427 having tested down to $1400/oz in Asia. While increased industrial demand has provided good support to platinum the metal has so far been unable to conquer technical resistance at $1490, the previous all-time high. For now we expect platinum to consolidate in the $1410-90 area and may need gold to push above $850 before challenging towards $1540.

Platinum

Palladium closed unchanged yesterday having worked in a $10 range between $280-90. Good chart support is expected at $278/270 in the coming sessions although for now the metal is likely to struggle to regain the $300 level.

Palladium


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