Gold reaching for $1,500

A quiet start was on tap for gold and silver this morning as no significant changes took place in the crude oil and currency markets. Platinum and palladium staged modest advances, however. Spot gold dealings opened with a loss of $2.20 per ounce and were quoted at the $1,493.70 level on the bid side in New York.

The overnight highs in the yellow metal came in at a level that was just 60 cents shy of the round $1,500 figure. Late afternoon Elliott Wave analysis opined that gold continues to apparently drive towards a target where trendlines converge, at the $1,535 area. However, the analytical EW team also notes that the Daily Sentiment Index (trade-futures.com) has now matched its previous extreme, with a 95% bullish level on display.

Silver spot fell 18 cents to start Tuesday’s session off at $43.20 the ounce. The bullish consensus picture in the white metal is even more reflective of speculative euphoric conditions, with the aforementioned EW team now noting a 95% level of bulls in the Daily Sentiment Index and a higher than 93% level in the 10-day average of the Market Vane Bullish Consensus indicator.

EW warned that “extremes are extremes and have to be recognized as such otherwise one gets caught up with the crowd and fails to extricate themselves at a reversal.” Ignoring a 5% decline in European new car registrations, platinum gained $5 to open at $1,784.00 while palladium added $8 to rise to the $741.00 mark per troy ounce. Rhodium market quotes remained unchanged at $2,300 bid/ $2,500 offer per ounce. The mood in the noble metals’ niche was more than likely being lifted by a Honda announcement that it was restarting auto assembly lines.

Our analyst friends at Standard Bank (SA) noted that Monday’s action in the PGM space “diverged from gold, as reduced confidence in the global recovery re-ignited doubts over industrial demand, in a market that remains uneasy over the impact of the Japanese earthquake. Speculative liquidation continued on TOCOM, although PGMs managed to hold their ground overnight.” They also observed that “some bargain buying and dollar weakness is providing some support this morning, although moves have been tentative so far. The modest increase in Eurozone PMI manufacturing for April (57.7 from 57.5 in March) could also lend some support to PGMs.”

Meanwhile, questions also continue to swirl around the issue of what the Fed might or might not do when its QE2 program comes to an end in June, and, with one week to go ahead of the next FOMC meeting, they have only become more visible. Some market watchers expect to hear or read clues as to the next phases of the Fed’s policies when next week’s meeting concludes. However, surveys and polls are already focused on what the months beyond July might bring.

Bloomberg notes that “Most of the 50 analysts in a survey [conducted] last month expected the Fed to keep its bond portfolio stable for some time after the purchases end, with a plurality of 16 betting on a period of four to six months. Five economists said the Fed would halt the policy once QE2 ends; 11 said it would keep reinvesting for one to three months; 14 said seven to nine months, and four said more than nine months.”

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