Gold steady after positive jobs report

In the Lead: “Trichet pulls the trigger (again)”

Against this background, New York spot precious metals dealings opened a bit on the mixed side this morning. Gold bullion showed a $3.20 per ounce loss on the open and it was quoted at $1,526.20 while silver gained 15 cents to open at $36.05 the ounce. Late Wednesday updates from Elliott Wave note that if the white metal is successful in overcoming the $38.80 resistance level then it might possibly target the $39.00 area subsequently.

Gold, on the other hand, would need to overcome the $1,558.00 mark to turn the bearish case into more of a bovine-looking one. Curiously, despite writings to the contrary in the hard money newsletter niche, US gold coin sales….fell on the first half of 2011. The US Mint’s gold coin sales declined by 14.4% mainly on account of ultra-high gold prices seen during the period.

The US Mint moved 576,000 ounces of gold in the form of assorted Eagle coins into the retail market. On the other hand, as has been the case historically, chasing the rising-to-the-sky silver price target proved very tempting (make that: irresistible) to small retail silver Eagle buyers; they snapped up 22.3 million ounces of such coins in the first six months of 2011. Shades of the pre Y2K silver coin rush…

Platinum started today’s session with a $4 per ounce loss and it was quoted at $1,723.00 while palladium gained an equal amount to rise to the $770.00 level. No changes were noted in rhodium. Yesterday, analysts at Commerzbank warned that the rhodium market is likely to experience increased volatility levels in coming months as the recent launch of a Deutsche Bank ETF that specializes in that noble metal begins to affect prices and trading patterns.

Rhodium gained 20% inside of one week recently, only to lose most of that gain over the ensuing fortnight. Separately, the CME reported that open interest in NYMEX platinum options set a new record two days ago. Quite the contrast vis a vis the gold and silver markets where open interest levels have RBC’s George Gero labeling them as “disquieting.”

Given the current situation in the US and in Europe, California-based MoKa Investors LLC favors the presence of a precious metals component in portfolios –but not quite at current prices. The reason for MoKa’s reluctance to “go all-in” is due to the fact that “recent economic numbers indicate the potential for a continued sell-off in stocks through the summer — a sell-off that could spark margin calls and raise liquidity issues among large investors who also hold positions in precious metals and commodities. That, in turn, would prompt a sell-off in gold as well.”

While not actually expecting a dramatic drop in gold this summer, the firm’s founders note that the trick is in gauging where ultimate support will be found. Initially, we would look at the 40-week moving average, equivalent to a 200-day moving average on a daily chart, as a potential support level for the yellow metal. Right now, that puts near-term support at $1,450 an ounce — but this projection must be watched carefully. In 2008, gold backed all the way down to the $700 level, right on top of a prior consolidation area. A similar 30% pullback this time around would take gold down to the $1,000 level – the top of the major consolidation zone from which gold broke out in late 2009.”

Until tomorrow,

Jon Nadler
Senior Metals Analyst – Kitco Metals

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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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