Gold continued its impressive move upwards yesterday triggered by a growing aversion to risk and technical buying signals. It breached strong resistance of $977/oz in early European trading yesterday and culminated by touching $999.50/oz in New York overnight. The $1000/oz is still a psychological barrier and anything close to that mark will probably instigate a period of profit taking. With that in mind gold has fallen slightly, currently trading at $989.90/oz. The all time high of $1.032.70/oz, reached in March 2008 was not sustained, but this time the gold market is more mature and despite the predicted profit taking, gold would appear to have the momentum to maintain a solid run above the $1,000/oz level.
Gold saw follow through buying yesterday with technical and momentum traders going long after gold’s technical break out. There is no real clear guidance from the dollar or oil today with both largely flat. Investment demand and asset allocation would seem to be the primary drivers with funds allocating monies to gold in September which is traditionally the strongest month for gold. The not unimportant matter of central banks becoming net buyers of gold in Q2 09, the first time since 1987, may be leading to further buying.
The speed and strength of the recent move up is bullish as it came with no ostensible or clear direct and immediate reason. What is interesting is that gold’s move up is not a function simply of dollar weakness rather we have seen gold move up in all major currencies which may indicate that investors internationally are becoming concerned about the long term threat of inflation.
Silver is at a 13 month high and is still outperforming gold. It is currently trading at $16/oz. It too, may face a period of profit taking, but as with gold, and perhaps more so, silver seems to have solid and robust momentum.
Silver surged 6% yesterday and is up some 14% in just two weeks. Silver continues to have the best fundamentals of all the precious and base metals and looks set to reach over $20 again in the coming months. Long term the nominal 1980 high of $50/oz remains a real possibility.
Platinum group metals
Platinum is currently trading at $1,257/oz with a good turnover of over 600kg on the Shanghai Gold Exchange yesterday. Palladium is gaining ground to test $300/z and is currently $293/oz. Rhodium is trading at $1,650/oz.