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London Bullion Report

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Gold edges higher as credit/recession concerns boost demand

Wed, Aug 27 2008, 06:34 GMT
by James Moore

The Bullion Desk


London, 27 August 2008 - Gold finished higher yesterday as credit market tightness and mixed economic signals drew renewed investment demand. EUR/USD dipped to 1.4571 after German Business Confidence proved weaker than anticipated, although the Eurozone currency was able to recover back to 1.4648 by the close. Economic data today will show July Durable Goods as well as US energy inventories. Concerns Hurricane Gustav may disrupt oil operations in the Gulf of Mexico led NYMEX crude to finish up $1.16 at $116.27/barrel.

Gold began the day around $820/oz but ran into selling pressure in Europe as the Euro fell in reaction to the Ifo data. The metal posted a low of $806.85 but was prevented from further weakness by good physical demand as well as investment bargain hunting. Steady demand on the US opening allowed a modest recovery back towards $815 before the rally accelerated as short covering was triggered. The yellow metal hit a peak of $830.60 before running out of steam as consumer confidence proved stronger than anticipated, leading gold to trade out the day between $820-30, closing at $822.25, and has seen a narrow range so far this morning. Again we expect oil and the dollar to lend further intra-day direction in the coming sessions, however it seems credit market jitters and recession/growth fears are beginning to draw fresh safe-haven demand from longer-term investors, while the physical sector is still keen buying metal below $850/oz. While gold is likely to run into scaled up resistance towards the $845 area there could be some sizeable stops lurking above, potentially allowing gold to gap higher once we get to the $845-50 area.

Gold Price

Silver dipped to $12.98 in yesterday’s European session before recovering during US trade to post a high of $13.74. The metal closed at $13.58 and may look to challenge towards the 400-day MA ($15.02) once pivotal resistance around $13.95 is cleared as investment demand increases.

Silver Price

Platinum traded lower in reaction to the moves in gold & silver but found good support ahead of the $1410 chart level. The white metal closed with a loss of $9 at $1418 and has rallied towards $1440 this morning following strong demand from Asian industrials. For now we expect platinum to consolidate in the $1410-90 area and may need gold to push above $850 before finding sufficient momentum to challenge towards $1540.

Platinum Price

Palladium finished Monday with a $3 loss, settling at $284. Further chart support is anticipated at $278/270 while the metal is will struggle to regain the $300 level until more bullish sentiment is seen in the rest of the complex.

Palladium Price


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