London Bullion Report
Pressure mounts as dollar rallies
Fri, May 2 2008, 09:20 GMT
by James Moore
The Bullion Desk
London, 02 May 2008 - Continued dollar strength put the precious complex on the defensive Thursday with gold dipping briefly below the $850/oz mark to its lowest since the start of the year. EUR/USD dropped 1.3% from a high of 1.5641 to post a low of 1.5428 as traders reacted to the FOMCs statement suggesting the US central bank was at the end of its current rate cutting phase, while steady economic data also lent background support. Oil prices also ran into selling pressure yesterday with NYMEX crude oil dropping to a low of $110.30 before settling at $112.52/barrel.
Gold saw an initial rally as trade got underway in Asia yesterday, with traders reacting to the initial post-Fed dollar weakness. The yellow metal posted a high of $881.70 before easing back and holding around $875. Selling pressure began to mount once the European session got underway with gradual dollar gains pressuring the metal steadily lower. Initial support was found around the previous days lows at $862 however the lower US opening triggered fresh selling pressure with gold dropping to the $850-55 area. Despite persistent offers gold found strong support, briefly dipping below the psychological level to post a low of $847 before closing just above at $850.20. While support at $850 is likely to be strong, particularly from the physical sector, we still see gold remaining under pressure in the short-term, with a substantial break below $850 potentially triggering a move back to technical support located around $836.75. Today’s Non-Farm Payrolls reading will be closely monitored but for now it seems the US economy is managing to keep its head above water and has prompted a temporary reduction in demand for safe-haven type assets.

Silver again looked to gold for direction, following the metal higher in Asia and setting the days high at $17.04. Gold’s push lower in European/US trade led silver to a low of $15.98 however the metal found good support and was able to close above $16 at $16.16. For the moment silver appears more resilient than gold, with further tests below $16 likely to encounter strong technical support back to the $15.35 area.

Despite the tight supply/demand fundamentals platinum also ran into selling pressure, breaking below $1900/oz to post a low of $1854. As traders get a clearer idea of the potential impact of last weeks Mitsui Auto catalyst news we expect both investors and industrial end-users will be viewing the current correction eagerly with strong support expected at the $1835 chart line and the $1800 low posted on March 20th.

Palladium lost a further $7 yesterday, closing at $407. Given the weakness seen in the rest of the complex palladium could look to target chart support at $385.

Published on
Fri, May 2 2008, 09:26 GMT
Archive
- Gold & silver rangebound, platinum steady ahead of Platinum Week
Published On Thu, May 15 2008, 06:36 GMT
- Precious metals finish lower as dollar firms
Published On Wed, May 14 2008, 06:38 GMT
- Softer oil reduces anti-inflation demand for gold, platinum off highs
Published On Tue, May 13 2008, 08:40 GMT
- Gold capped by chart resistance, platinum drifts on profit taking
Published On Mon, May 12 2008, 08:13 GMT
- Oil triggers inflation demand for gold, platinum up on ETF speculation
Published On Fri, May 9 2008, 10:08 GMT
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