Gold Falls on Positive Jobs Number – Close to Record Nominal Highs at $1,264/oz

Gold

Gold is slightly lower while silver has risen again today after they rose 1% and 3% respectively yesterday as investors moved into the safety of AAA rated government bonds and the precious metals. Both gold and silver have remained firm in Asian and early European trading despite an increase in risk appetite as seen in the bounce in Asian and European equity markets. The fall in jobless claims has added to risk appetite and seen gold come under pressure, while silver remains firm. Some calm has returned to European sovereign debt markets after the successful Portuguese and Irish debt auctions. Government bonds have fallen in value after their recent rise and the increasing spreads between peripheral European economies and Germany have eased.

Gold is currently trading at $1,238.30/oz, €973.51/oz, £796.54/oz.

Gold’s, and particularly silver’s, move up is unusual and is bullish as in recent years, the day before options expiration which is today, would normally see sharp selling and liquidations prior to an equally sharp rebound. The precious metals rise yesterday and firmness today suggest that there are eager and determined buyers at these levels who are willing to take on the determined sellers in the pits. Technically both gold and silver look very good and gold’s record highs of $1,264/oz (nominal) look likely to be breached sooner rather than later. There is no technical resistance above the $1,264/oz level and gold would likely then target the psychological round figure of $1,300/oz.

There is speculation of central bank buying in recent days pushing the price to near new record (nominal) high prices. This seems more than possible as we know the Chinese, Indian and Russian central banks have been buying gold. Only last week, Russia’s central bank said that it added 500,000 ounces of gold last month, increasing its stockpile to 23.3 million ounces. That followed last year’s purchases by India, Mauritius and Sri Lanka. The World Gold Council reported yesterday how central banks were net buyers of gold for the 5th straight quarter and central banks, who declared their purchases, bought 7.7 metric tons during the quarter. Indeed, it is likely that some larger central banks are not declaring their purchases in an effort to secure better prices and not cause a price hike. Indeed, this is how the Chinese increased their reserves between 2003 and 2009. SAFE, part of the central bank, the People’s Bank of China, last year revealed its gold reserves had grown to 1,054 tonnes from 600 tonnes in 2003, mainly the result of buying up local production. These purchases were not declared at the time.

Silver

Silver is currently trading at $19.11/oz, €15.03/oz and £12.29/oz.

Platinum Group Metals

Platinum is trading at $1,526.25/oz, palladium is at $503/oz and rhodium is at $2,050/oz.

Mark OByrne

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