Gold eying $1,800, but depends on Europe

In the Lead: “Arrivederci, Roma!”

Metals markets opened firmer on Monday as the on-going Eurozone drama continued to play out without signs of a resolution despite the G-20 summit’s end. Gold moved higher despite a slip in the euro and a slightly stronger US dollar. Spot gold dealings started off at $1,776 and remained within the $1,775-$1,780 resistance zone while silver added 45 cents (to open at $34.54) and then remained nearly static for the first hour of trading action.

Potential attempts to touch the $1,800 mark might be in the works for the day/week in gold but nervousness prevails and European news will play the pivotal role in the market, perhaps more so than the dollar’s gyrations. On the other hand, silver does appear to be struggling somewhat at this juncture.

Veteran market follower Ned Schmidt relays his take on the white metal as follows this morning: “[The] chart has a decidedly negative pattern. Silver has been trading below the 200-day moving average, now $37, since the last week of September. All of that does not create a picture of a price preparing to skyrocket to a new high. Rather, it is a picture of something with the path of least resistance being down. We still expect Silver to make an important low in the first quarter of the new year.”

A similar take on silver was found in the late Friday production of the Elliott Wave update: “A ‘double divergence’ has developed between gold and silver. Silver made a lower high in early September relative to gold's all-time high at $1,921.50 on Sept. 6. This five-month bearish divergence between the higher-beta silver and the lower-beta gold led to a decline in both metals to the Sept. 26 low at $1,532.20 in gold and $26.02 in silver. Both metals have bounced since, with another smaller divergence developing since October 28.

“Gold has exceeded its Oct. 28 high while silver remains beneath its similar high at $35.71, which met the internal trend line shown on the chart. Since the near-term wave structure of the bounce in both metals counts best as an upward correction, the potential remains high for renewed across-the-board decline. Gold's next leg lower, a third wave, should eventually draw prices toward $1,300, the bottom of a fourth-wave of lesser degree. The area surrounding the $23.00 level in silver remains the next short-term target.”

This morning at least, gold partially benefited somewhat from the clarification that Germany would not employ portions of its gold reserves to bolster the EFSF. It has been reported that France (at the G-20 meeting) had suggested that the Bundesbank could resort to some of its ample gold holdings in order to reinforce the rescue fund. Platinum and palladium advanced only modestly ($3 and $4) and traded at $1,636 and at $658 per ounce respectively. While the recent steep fall in platinum-group metals prices has brought a buying opportunity about, the enthusiasm manifest among fund and speculative players remains a tad tentative if one parses the positioning data provided by the CFTC.

On the fundamentals’ side of the PGM market equation, carmaker GM reported a 10% gain in October car sales in China; it moved over 220,.000 vehicles into local consumers’ hands. Meanwhile, Toyota Motor Co. managed a 32% sales gain last month and unloaded 802,000 vehicles in that market. Toyota currently remains stymied by supply issues resulting not from the March Sendai quake but by a natural disaster of another sorts; the floods in Thailand. The rising waters near Bangkok have halted production of certain Toyota models and will also interrupt the output of other ones this week and next. Copper and oil diverged; the former lost 0.59% while the latter climbed by an equal percentage as the focus remained on news flows from the Old World.

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