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London Bullion Report

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Gold holds gains as Fed maintains its stance

Thu, Nov 5 2009, 09:53 GMT
by James Moore

The Bullion Desk


London, 04 November 2009 - Gold continued its push higher Wednesday hitting a new record high above $1090/oz as follow through buying, a result of Tuesdays RBI/IMF purchase and producer related buying, triggered stop-loss orders. The bullish tone was echoed across the precious complex and most of the commodity sector as rhodium hit its best in a year, crude oil tested above $81/barrel, although the CRB Index posted only marginal gains as some soft and grain products came under pressure. In contrast the Dollar succumbed to further weakness with the Euro pushing back to 1.49 and the DXY down 0.7%.

Equities proved more mixed as traders pared their longs ahead of the Fed announcement. In the end the FOMC statement appeared to show a cautious but also slightly more optimistic Fed, reiterating its intention to keep rates "exceptionally low" for "an extended period". The Fed also gave a listing of the criteria required before the Fed raises rates, which could be some time before being met and is likely to fuel further risk appetite, boosting demand for commodities and equities.

Light profit taking was seen as trade got underway in Asia yesterday however gold was supported ahead of the $1080 level and traded $1080-85 across the session. Strong buying, thought to be producer related, emerged in early European trade pushing gold to $1090 with the metal continuing on to $1095.50 before running out of steam. The metal held ground close to its highs the remainder of the day, eventually touching $1097.80 in after-market trade in reaction to the Fed announcement.
The Fed statement could prove to be double edged. On the one hand tame inflation expectations could reduce some investment demand for gold but the most likely outcome will see the return of risk appetite, potentially fuelling further gains in gold or at the very least limiting pockets of weakness and prompting further dip buyers. All eyes now turn to Friday NF Payrolls, forecast to show a decline of 173K compared with the previous months 263K.

Gold

Silver posted a gain of 1.5% with the AU/AG ratio slipping back to 62.5.
The metal is still struggling for traction though and is likely to face further resistance ahead of last months high of $18.11, but with gold testing ever higher investors looking to diversify into gold could start to look favourably upon silver.

Silver

Platinum traded to a high of $1575 during NYMEX trade before easing back towards the close as profit taking emerged. The white metal closed up $7 at $1364.
Sister metal palladium gained in Europe, posting a high of $334 but followed platinum lower to close unchanged at $327. Rhodium hit its best in a year at $2100 offered.
Octobers US auto sales coupled with the improving macro economic outlook and strong investment demand paints a solid fundamental picture for the PGMs however short-term price movements are likely to depend heavily on the gold and silver.

Platinum


Palladium


Archive

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