Gold adds to fear premium for Libya and Japan

The new week began as grey plumes rose skyward for very different reasons in two very distant parts of the world. The billows of smoke that were seen rising from two of the crippled Japanese nuclear reactors were raising concerns that feverish, but apparently somewhat successful, weekend efforts to cool their cores suffered some kind of a setback. Meanwhile, over in Tripoli, the smoke emanating from certain buildings within Col. Gaddafi’s own compound underscored the success of the sorties that allied military forces have undertaken since Friday in targeting key assets in Libya.

The outcome of either dramatic even is, at this juncture however, far from certain and even though Japan’s Prime Minister Kan, as well as Western coalition leaders do see some kind of light at the end of respective tunnels in Japan and in Libya, the road to those exits may yet offer hard to fathom setbacks and difficulties. That’s the kind of uncertainty that will be keeping oil, gold, and equity markets on the volatile side for yet another series of trading sessions set to unfold this week.

As mentioned above, there was some optimism on both fronts, as the 11-day-long scramble to prevent a meltdown at Fukushima and the three-day-old campaign to neutralize Mr. Gaddafi and his forces appeared to be going in the right direction as of late Sunday. However, the final chapters of either saga have yet to be written. Estimated casualties in Japan could rise above the 20,000 figure, while Libya’s political future remains pretty much anyone’s guess at the moment.

Thus, Monday morning’s New York trading sessions opened with robust gains both in black and yellow gold as speculators continued to add a healthy dose of fear-based premium to both commodities, and as they sold the US dollar off some more in the process. Spot gold dealings started the day off with a $12.20 per ounce climb to the $1,431.90 level, and although resistance is thought to be looming overhead in the mid-1,430s, the bets being currently made by market participants allude to potential visits to the previous highs near $1,444 or perhaps higher (in the range of from $1,480 to $1,530).

Analysts at Standard Bank (SA) took note of the latest 2.5% decline in non-commercial net long gold positions and thereby reiterated their $1,500 target for the metal for sometime in the third quarter of this year. Of course, not everyone shares the same opinion about future price prospects in the yellow metal, but most observers do appear to be linking pivotal future developments in bullion on the ones yet to come in US interest rates.

Silver trading opened with a gain of 78 cents as the white metal rose in concert with its more precious relative to touch $36.06 per ounce. As with gold, a successful breach of the previous highs might provide sufficient speculative fuel to possibly propel the metal higher, but conditions become sufficiently rarefied at those levels to make for a notably nervous trade.

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