Euro rebound caps gold advances

Gold prices remained above the $1210 level overnight but the metal was as yet unable to add significant amounts to Tuesday’s Portuguese downgrade-induced gains as rising overseas equities markets and a rebound in the euro capped advances. Indian buyers remained on the sidelines as shopkeepers reported no changes in pending orders for bullion purchases from would-be buyers under the $1190 value zone- the very price neighborhood from which the yellow metal rebounded recently. Should assaults on the $1220-$1235 region fail to be successful, such buyers may yet see their orders filled.

On the market and economic fronts, the euro eked out further gains following yesterday’s early dip and rose to above 1.27 against the U.S. dollar this morning. The latter remained largely static at lower levels and was last seen at the 83.50 level on the trade-weighted index. Crude oil also remained stalled and showed modest declines towards the $77 per barrel mark after reports revealed a gain in U.S. inventory levels.

Earnings reports remain at the centre of this week’s equity markets’ focus and a second bellwether firm –Intel- announced solid results. Market players now await U.S. retail sales data and the release of the last Fed meeting’s minutes. Less than encouraging news continues to come in from the real estate sector in the U.S. however; mortgage applications to purchase new homes fell to a fourteen-year low as the end of the home-buyer tax credit incentive took its toll. The majority of applicants for loans were people seeking to refinance instead.

Industrial output in the eurozone continued to show gains-albeit lower than expected ones- with the latest report indicating a 9.4% rise in the year-on-year figures for the month of May. Germany remains the look-to country in the 16-nation economic zone and it is seen as the core of growth as well as the patron saint of the recently beleaguered common currency. In fact, the country has every incentive to help keep the euro alive as it continues to benefit from its exports to the region while helping keep domestic unemployment and near two-decade lows.

Pundits calling for the demise of the euro –now that the single currency has actually gained 6.6% against the greenback during just the past month- have an amount of egg on their respective faces just as large as that which was present when the U.S. dollar failed to succumb and be buried late last year. In other ‘too-soon-to-call-this-one-dead’ news, banking giant UBS this morning backed away completely from its recommendation to short the British pound.

Spot precious metals dealings opened the midweek session with growing losses following a stable overnight period, as the Tuesday recovery rally appeared to lose steam on waning safe-haven demand. Fear has been slowly but surely leaking out of the gold market since the metal reached an all-time pinnacle last month. Spot gold started the day with a $4.50 drop and was quoted at $1206.80 per ounce. Silver fell 14 cents to open at $18.11 the ounce.

Meanwhile, platinum and palladium only showed minor price negative trends as well, with the former shedding $6.00 to $1519.00 and the latter slipping $1.00 to the $463.00 level. Rhodium remained at $2380 after having shed $30 in the previous trading session. IB Times reports that the surplus in the palladium market is set to shrink by 62 percent in the current year (to 217,000 ounces), while platinum’s is likely to increase a bit further. At the end of the [trading] day, the recent trading ranges remain in place for the complex –especially gold- as price supporters and profit-takers duke it out each time gold reaches for either extreme of the charts (near $1185 and/or near $1220).

Jon Nadler is a senior analyst at Kitco Metals Inc. North America.

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