Metals update for April 5

The positive jobs report issued last Friday reverberated into this morning’s market action in various assets. Although the 162,000 jobs added last month were the most in 36 months, the headline figure did miss economists’ expectations, the shortfall was due to fewer-than-forecast census-takers being hired by the U.S. government. Thus, the conclusion that the U.S. economy is, indeed, finally, on the path to recovery, was given a ‘valid’ label as the first quarter of 2010 ended.

Gold prices stabilized near the $1125 value zone in thin overnight dealings, and with the London market still closed today, more of the same can be expected today. More thin trading, more excess volatility, more exaggerated moves engendered by such conditions. The new headline number to watch this morning will be the ISM non-manufacturing index one. As well, participants will not lose focus of the U.S. pending home sales figures. More importantly, hardly anyone will miss being on the lookout for the Fed’s closed-door meeting today. The discount rate will come into discussion and an ample supply of Fedspeak will also be on tap this week.

New York spot metals dealings opened with muted and mixed results for gold and for silver, however the noble metals complex continued to move higher on the back of continued ETF attention being manifest again. Economic recovery spells robust auto sales in the speculators’ market book. Iron rolling off the lots spells higher offtake of platinum/palladium/rhodium in said books.

Spot gold traded ten cents higher on the open, quoted at $1126.50 the ounce, while silver slipped one penny to start at $17.90 per ounce. Platinum gained $13 per ounce, opening at $1681.00 while palladium added $1 to rise to the $490 level – a two-year high. Overbought conditions in the white metals give reason for caution. The dollar continues above the 81-mark on the index, while the euro has not recaptured the 1.35 level despite what appeared to be a near-term respite in the credit/budget/eurozone debacle.

However, gold’s own two-week peak achieved last week and the essentially dollar-bullish tilt that the jobs data should engender, might also make for difficult work when trying to overcome resistance found overhead near the $1135-$1140 area. Elliot Wave analysis spells the numbers a bit more precisely, arguing that any rise above $1134.50 would imply that gold could move higher (as in, towards $1162 or more), whilst a failure near these levels could take the yellow metal towards the $950 zone first. As of the latest tally, open interest in gold shrank by roughly 15K contracts and our friends at RBC Capital Markets are tracking higher levels of attention being given to copper and platinum on the basis of the perceived U.S. economic rebound.

Muted conditions prevailed in the physical markets over the weekend, with local prices slipping beneath world quoted values in Vietnam. Spreads have narrowed to as little as 20,000 dong per tael (37.5 grams) as dealers try to attract reluctant investors. Indian buyers remained largely on the sidelines, apparently preferring to wait for a resumption of full-bore trading around the world on Tuesday.

Jon Nadler

Senior Analyst, Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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