Last week’s early September relief rally continued this morning as equities have risen again in Asia and Europe. Gold is one of the strongest currencies in the world this morning, along with the yen. While the dollar is flat, sterling has fallen sharply against all currencies on UK economy concerns and gold in sterling terms has risen from £806/oz to £811.20/oz (see Cross Currency Table).
Gold sold off on the better than expected jobs number on Friday but bounced back as equities pared their initial gains and the dollar weakened. Gold is continuing to show resiliency and all recent sell offs have been met with buyers eager to buy on the dips.
Gold is currently trading at $1,249.15/oz, €970.74/oz, £813.62/oz.
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Gold’s 1% rise last week resulted in its fifth straight week of gains and this in conjunction with the strong August performance and record monthly close is bullish technically. Record highs look quite possible this week given the sound technical and fundamental picture. Should resistance at $1,258/oz be breached we will be in unchartered territory and this could see gold rise sharply to target the round figure level of $1,300/oz.
New record highs (record daily high close is $1,258/oz and record inter day high is $1,265/oz) are only a whisker away, just over 1% and yet sentiment remains calm and media coverage muted. While open interest levels (as seen in Commitment of Traders – COT – data) has risen sharply and are only 2 million ounces below the high of 32.8 million ounces in October 2009, there is room for more longs to enter the trade and push gold onto record highs. Indeed, given the degree of continuing macroeconomic and sovereign risk there is no reason that the open interest levels could not go higher than the recent record levels.
Silver is looking very well technically after its recent consolidation. The price action in silver has been impressive with every sell off being greeted by the large buy orders and short inter day rallies of some 50 cents in a matter of hours. There is resistance at the $19.50/oz level (12th of May high is $19.54/oz) – once breached, silver could rapidly rise to $20/oz before taking a breather.
Silver prices in the futures market continue to exhibit signs if backwardation which could be a sign of tightness in the silver market. As of 1000 GMT, spot silver was trading at $19.45/oz. The Sep10 contract at $19.435/oz, Oct10 contract at $19.445/oz and the Nov10 contract at $19.39/oz. Standard Bank’s senior commodity analyst, Walter de Wet notes "a tightening in the physical silver market . . . with increased demand from mainland China absorbing much of the silver supply traditionally coming to the wider market from Hong Kong."
Silver – 40 Year (Quaterly). Click on image to view full size
Gold/Silver Ratio – 5 Year (Daily). Click on image to view full size
Platinum Group Metals
Platinum is trading at $1,559.50/oz, palladium is at $527/oz and rhodium is at $2,050/oz.