London Bullion Report

Oil triggers inflation demand for gold, platinum up on ETF speculation

Fri, May 9 2008, 10:08 GMT
by James Moore

The Bullion Desk


London, 09 May 2008 - Fresh records in the energy sector triggered renewed investment demand in gold yesterday as traders sought to off set inflationary fears, while platinum gained almost 3% after reports Swiss-based UBS were launching a new US based platinum Exchange Traded Note. NYMEX crude pushed to a high of $124.61 and after closing off its highs at $123.69 has risen this morning to $124.75. EUR/USD rallied to 1.5440 in reaction to the ECB rate hold and comment from President Jean-Claude Trichet. The Eurozone currency has extended to 1.5487 after closing at 1.5406. Economic data today will show the US Trade Balance for March forecast at $61.3bn.

Gold spent the early part of the day trading $865-69.50 as good physical support negated initial dollar strength. The yellow metal began to track higher once the European session got underway, trading initially to $873.75 before extending higher in reaction to the ECB’s decision to keep rates on hold. The rally stalled around $880 before pushing to a late high of $885.75 as both oil and the dollar provided momentum. Despite closing off its highs at $881.25 gold has extended towards $890 this morning, and having cleared trend-line resistance around $879.50 the yellow metal should look to challenge initial resistance around $893/96 before reclaiming $900.

Gold

Silver posted a high of $16.97 during US trade yesterday and has probed above $17/oz this morning. The metal is likely to encounter strong resistance between $17-17.24, but given the recent increase in investment demand through the ETF’s, the inflationary pressures created by rising oil and return of weaker dollar sentiment we would look for silver to target resistance around $17.85.

Silver

The launch of another ETF type product in the already tight platinum market triggered flurries of buying interest yesterday lifting the white back above $2000/oz, and on to almost $2100 this morning. Given the already tight conditions and the markets nervousness towards a deeper supply deficit we could quite easily see the metal set new highs, and will certainly remain underpinned in the coming months.

Platinum

Palladium gained $12 yesterday, closing at $432. Clearance of resistance at $440 would open the way for a re-test of $465.

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