Friday, July 16, 2010

PRECIOUS METALS - European Opening View - Gold eroding resistance, PGMs dip


Forex Special - London, 16 July 2010 - Steep declines in both the Fed Philly and Empire State manufacturing indexes dented stock and commodity sentiment Thursday as well as pressuring the US Dollar to a fresh two-month low against the Euro, which reclaimed the 1.29-level. Despite strong earnings from JP Morgan Chase the fall in manufacturing led the Dow down as much as 1.2% but recovered to close down 0.1% after news Goldman Sachs had agreed a deal with the SEC and the US Senate approved the financial reform bill; the S&P500 posted a 0.1% gain. Industrial commodities reacted bearishly to the slowdown in US manufacturing: copper closed down 0.65%, crude oil was off 0.55% however the CRB Index closed up 0.77% after grains surged. In the currencies the EUR/USD gained 1.5%, EUR/JPY settled up 0.4%.

Speculation of reduced exports has hit Japanese stock sentiment overnight; the Nikkei is currently down 2.9% while the broader MSCI Asia Pacific Index is off 0.5%. The Yen meanwhile has touched a 7-month high against the greenback below 87; the Euro has lost ground against the dollar, currently down 0.15%, EUR/JPY is off 0.35%. A mixed start has been seen in commodities with light bargain hunting in base metals, precious metal are trading slightly lower while crude oil is currently down 0.3%.

Economic data today will show EU and Italian Trade Balance, US CPI and Consumer Sentiment; TICS Long-Term Purchase data could lend direction to the Dollar and also gold, reflecting investor sentiment.

Gold continued to hold at the top of its recent $1185-1215 range, testing to a high of $1217.40 but again failing to conquer the strong overhead resistance. Gold closed down 0.3% while silver settled unchanged at $18.27 after trading $18.16-53.
Both metals have seen a steady start and gold’s continued failure to conquer the $1215-19 resistance band leaves the metal vulnerable to further stale liquidation; that said, dips remain well support and converging chart indicators suggest the metal is close to a break-out and may look to re-test $1245 and possibly the $1265 high. Silver will again be looking to gold for direction although clearance of resistance around $18.65-80 would enable a re-test of $19.20/50.

Platinum and palladium were both confined to narrow trading ranges yesterday, closing at $1527/465 respectively. 
Both have come under pressure overnight however, in reaction to the drop in Japanese equities and Yen appreciation. Platinum is currently trading down 0.5% and palladium 1.7%; chart support below is expected around $1490 and $435 respectively.

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