Gold attracting bargain-hunting buyers

In the Lead: “Muni-ficent”

Gold built on its $40 Wednesday loss after hours and fell further in electronic trading in the early evening hours. The overnight dip to the $1,580s in gold did however attract a sufficient amount of bargain-hunting buyers to bring the yellow metal back to above the $1,600 mark by Thursday morning’s opening bell in New York. Still, global investors remain on alert for eurozone-related market surprises that could impact the commodities’ space and further erode values in coming sessions.

With but one day to go in the month, spot gold is off by $176 on the 30-day tally and is about $300 down from its double-top levels. Overnight markets were not kind to silver either, as the white metal probed under the $30 mark in a fast-paced evening sell-off and then managed a climb back above the round figure this morning.

Late afternoon Elliott Wave analysis sees the precious metal trading towards the bottom ($1,614) of its recent channel, which, if breached, could draw prices initially to near the $1,300 mark and then an eventual target near $1,040 the ounce. A rise above $1,670 might delay the commencement of the next down-leg in values. Broad resistance is found in the $1,675-$1,750 zone at this point.

New York opening prices were all mildly higher this morning as the US dollar retreated by 0.53 on the trade-weighted index following news that the German legislature had passed the measure intended to beef up “Das Tarp” (the “EFSF” by another name) and that despite stalling on the part of countries such as Slovakia (?!) the odds are slowly but surely tilting towards a positive resolution to the crisis that has gotten the “attention” of most of the world’s markets and of the stewards of their respective economies.

Spot gold climbed $2.60 per ounce to open at $1,612 this morning while spot silver advanced 14 cents to start the day at $30.07 the ounce. Physical demand is being banked upon to keep optimism alive among the bulls but the seasonality factor turns out to be less than reliable, historically speaking, if and when gold prices commence a surge once again. Indian festival season comes in late October.

For the time being, the sporadic bargain hunting that emerged from Thailand and China-based buyers was offset by the absence of participant in the West, some of whom were on hiatus due to the Jewish high holidays. Volatility is likely to remain manifest ahead of Rosh Hashanah on Friday, the end-of-the-quarter book-squaring rituals, and China’s start on Monday of “Golden Week” holidays.

In September and October of 2009, note the analysts at Standard Bank (SA) gold moved up by 13% (from $950 to $1,060) and physical demand collapsed (while scrap sales intensified) despite what the calendar said was supposed to be a high-demand season for the yellow metal. Silver now seems to be moving closer to lockstep patterns with gold and it could potentially be aiming towards the $22-$25 area but such a move could also be delayed if in fact the white metal manages a push above the $33 level. Resistance above that mark is found broadly within the $34 to $37 zone in prices.

Platinum initially fell $3 but the climbed above the unchanged mark by the same amount and basically hovered around the $1,520 level. Palladium gained $3 as well, opening at the $620 level while rhodium shed $25 to level off at $1,700 on the bid side. In the background, the price of a barrel of crude oil rose by 57 cents to $81.78 and copper made a barely perceptible tick higher, climbing $0.0005 (!) to $3.2058 on the bid-side. Let’s call all these advances…timid (for now). The same can be said about the Nikkei’s 85-point lift in Tokyo overnight. Dow futures appeared set for a more upbeat day.

A surprising drop in US initial jobless claims filings (down 37,000 on the latest reporting week) to under the 400K level was initially greeted with joy but the US Labor Department attributed it to “technical” adjustments, in effect telling the markets “not so fast!” as the looking-back figures are normally subject to revisionist practices, such as the upward adjustment of the numbers it issued two weeks ago. Mr. Bernanke still calls the US unemployment situation a “national crisis” which – he feels – the White House and Congress must address in concert with finding solutions to the nation’s housing debacle.

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