BULLION MORNING - Bullion edges higher, holds in range in start-of-week trade

By: Royston Wild

London 04/04/2011 - Precious metals continued to rise as part of a cross-commodity surge on Monday morning, still supported by global financial and political woes but hemmed in by heightened expectations of possible monetary tightening.

Spot gold rose to a session peak of $1,435.65 per ounce and was last at $1,434.75/1,435.55, up $6.

On the charts, resistance is seen at $1,439, $1,442 and $1,447, with support back at $1,413, $1,412 and $1,406.

Despite today's gains, gold has remained within a broad range around $1,420-$1,440 in recent sessions. Still, further gains are possible given the stable supportive backdrop, analysts said.

"Gains in gold and silver this morning have possibly set the tone for the week, with both metals again rising on safe-haven and inflation hedging," analyst James Moore of FastMarkets said. "The upside target for gold remains $1,450 [while] silver could look to target the $39-41 area.”

The civil war in Libya and threat of escalating unrest in neighbouring regions, the aftermath of the recent Japanese earthquake and the developing nuclear crisis there and the spectre of sovereign debt contagion in Europe have underpinned flight-to-safety interest.

Spot silver was also strong, rising to a fresh 31-year high at $38.48 per ounce this morning, driving the gold/silver ratio to another low since 1983 at 37.26.

Silver has since settled lower but at $38.43/38.49 was still 62 cents higher.

As well as traditional safe-haven considerations, it benefitted from renewed optimism over the US economic recovery after a slew of generally positive data on Friday.

Non-farm payroll figures for March came in at 216,000, well above predictions of 191,000 and rising from 192,000 in the previous month. This was the best monthly result since May 2010.

The unemployment rate also fell, dropping to its lowest for two years at 8.8 percent, beating expectations for a reading of 8.9 percent - unchanged from February.

ISM manufacturing PMI for March was 61.2, above an expected 61.1 but falling from 61.4 previously. ISM manufacturing prices came in at 85, ahead of forecasts of 83.1 and up from the prior figure of 82.

Inflation-related data this morning showed eurozone February PPI rise 0.8 percent, above a forecast of 0.7 percent. This was down from the previous month's figure, which was cut to 1.3 percent from 1.5 percent.

Sentix investor confidence for the current month was bearish - at 14.2, this was below forecasts of 16.1 and falling from 17.1 in March.

Eyes will now be fixed on the latest statement from Federal Reserve chairman Ben Bernanke later today. FOMC member Evans is also set to talk.

In China, the SHFE will remain closed for the next two trading days for Tomb Sweeping Day.

In broader markets, the euro surged to a five-month peak of 1.4267 against the dollar earlier, boosted by rising speculation that the ECB looks set to raise interest rates as early as this week.

It has since settled into negative territory and was last at 1.4220, almost a quarter of a cent lower.

The prospect of fiscal tightening from central banks across the world - including interest rate increases across Europe, the US and additional measures in China, as well as the withdrawal of quantitative easing package in US - has put downside pressure on bullion amid fears of falling liquidity and rising costs for holding gold.

WTI crude rose to a fresh two-and-a-half-year peak at $108.78 per barrel this morning, again raising inflationary worries, before settling at $108.36, still 44 cents higher. Oil has continued to punch fresh highs as the military conflict in Libya rumbles on.

In other precious metals, palladium, like silver, rose to fresh highs, striking its most expensive since March 10 at $784.50 per ounce. At $778/788, it was last $3.50 higher.

Sister metal platinum gained $12 to $1,777/1,787 per ounce.


(Editing by Mark Shaw)

RELATED TOPICS