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London Bullion Report

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Precious metals consolidate, await next move by dollar

Mon, Sep 8 2008, 06:11 GMT
by James Moore

The Bullion Desk


London, 08 September 2008 - While gold was able to close last week above $800/oz the precious complex again showed its vulnerability to improving dollar sentiment as silver dipped to fresh lows for the year while palladium headed back towards the lows of last month. EUR/USD closed off it low of 1.4197 at 1.4267 however speculation of economic contraction in the Eurozone could see the Euro lose further ground in the week ahead and would have a negative effect on commodities.
NYMEX crude oil finished Friday down $1.66/barrel at $106.23, but with further storms/hurricanes brewing in the Caribbean supply jitters could spark price gains.

Despite rallying in reaction to the drop in US payrolls gold again felt heavy Friday, struggling for upside traction as improving dollar sentiment and cash generating long liquidation prompted bouts of selling. Encouragingly from a psychological view gold was able to finish astride $800, and as we head towards the fourth quarter and key festival season the market should remain supported by jewellery related demand. But, with credit market liquidity still extremely tight we could see commodities remain under heavy pressure in the short-term before gold benefits from fresh safe-haven investment demand. Commitment of Traders data for the week of September 2nd showed a 37.59-tonne decline in the NC net long to 289.8-tonnes as almost 800k/oz of long were cut and just over 400k/oz of shorts were added.

Gold

Silver had a brief test above $13/oz on the US opening before running into steady fund related selling across the remainder of the day, posting a new low for the year at $12.08. The outlook for silver will still depend largely on gold in the coming sessions, with a failure to hold above $12/oz potentially triggering a re-test of last Augusts lows of $11.43/11.06. COT data showed a 2.87M/oz reduction in the net NC long last week as fresh shorts outweighed new longs, while the most up-to-date data shows ETF investment holdings remain steady.

Silver

The combination of dollar strength and industrial demand confined platinum to range trade between support at $1340 and resistance a $1400. The white metal has found light support overnight and should continue to find psychological support around the $1340 level and further industrial off-take towards $1300/oz, however with recessionary fears denting demand and the dollar strength eroding investment demand a failure to hold above the recent $1304 lows could trigger a deeper move back towards the $1250-60 area. COT data for last week showed a 6,550/oz increase in the NC net long to 177,100/ozs.

Platinum

Long selling from speculators led palladium to finish almost $20 lower Friday, settling at $268.
Further support is expected between $266-62, although a break below $258 could trigger a move to $240. Speculative short covering as well as fresh longs led the NYMEX NC net long to jump 96,600/ozs last week to 424,900/ozs.

Palladium


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