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London Bullion Report

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Precious metals open steady but could be weighed by equity pressure

Mon, Nov 2 2009, 08:25 GMT
by James Moore

The Bullion Desk


London, 02 November 2009 - Despite Thursdays GDP reading and positive PMI and Consumer Sentiment data Friday investors continued to take risk exposure off the table Friday with equities and commodities seeing further profit taking. Both the Dow and CRB Index closed down more than 2% while the EUR/JPY fell and Dollar Index rallied 0.5% on safe-haven demand. 

Also witness Friday was a 24% surge in the VIX volatility Index - its largest gain since October 22nd last year - and suggests concern of a deeper equity rout is mounting.

Equities have lost ground overnight with the Nikkei currently down 2.3% and the broader MSCI Asian Index off 0.5%. In the currencies the Dollar Index is down 0.25% despite speculation of further official intervention while the EUR/JPY has edged higher as safe-haven demand is reduced. Overall though we believe the risk of a deeper correction remains with direction as a whole driven by the line-up of economic data, particularly Fridays NF Payrolls and unemployment rate. Data today will show EU, UK and US Manufacturing PMI, US Pending Home Sales and Construction Spending.

Gold opened initially firm Friday, trading to a high of $1048.90 in Asian before turning lower as the dollar firmed. The stronger dollar would keep gold under pressure across the European session and most of the US session, posting a low of $1035.25 before rallying in the late part of the session to close the day at $1041.
Gold remains steady so far this morning and will again look to the dollar for direction however the metal appears to be lacking upside momentum and may be at risk to further pressure as we believe equities could be brewing for a deeper correction. On the charts support is expected at $1038/1030 and below at $1020 with resistance pegged at $1060 and $1071. Fridays Commitment of Traders showed a 1.9Moz reduction in the net speculative long as 1.6Mozs of gross longs were cut and fresh shorts added.

Gold

Silver closed Friday down 2.1% at $16.29 after trading $16.15-75.
The metal has tracked gold this morning and should find further chart support at $16.11/15.91. COT data Friday showed a reduction in both gross longs and shorts, as a result the speculative net long was reduced by 12.7Mozs to 347.67Mozs.

Silver

Platinum closed down 1% Friday after touching a low of $1314 and sister metal palladium finished off 1.5%. ETF Securities platinum holdings declined 3.3% or 13.2Kozs to 385.4Kozs.
Light two-way trade has been seen so far this morning although both metals could come under pressure this week with the release of US auto sales results.
In contrast to gold and silver net speculative holdings in the PGMs increased last week. Despite a reduction in gross longs the net long in platinum increased 10.6Kozs to 1.17Mozs on short covering. In palladium new longs and short covering lifted the net long by 73.7Kozs to 1.53Mozs.

Platinum


Palladium


Archive

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