Morning Gold Fix – May 24, 2011
FMX | Connect – www.fmxconnect.com - (Reported 5/24/2011)
The following is a summary of yesterday’s US gold activity and a recap of Asia & European markets overnight. It includes our proprietary options analytics and news stories from industry professionals.
Summary
June Gold settled at $1515.40 per troy ounce on Monday, a gain of $6.50 for the day. Gold gapped higher overnight and options were bid.
June gold was up $5.9 to $1517.2 per 100 troy ounces as of 8:15 am EST this morning. The June U.S. dollar index was down 0.114 to $76.120. Jul platinum was up $6.5 to $1762.4 per 50 troy ounces. Jul silver was up 84.6 cents to 35.750.
Market Commentary
Over the last week the global marketplace has changed towards showing a deflationary bent. This is usually bearish for gold but we believe that gold will continue to rally and if it doesn’t, it will be the tallest pygmy. There are three items pulling on the market now that are easily identified:
1. Greece is showing signs it may default and is threatening to pull out of the EU if its debt isn’t restructured. This highlights the weakness and potential insolvency of the ECB, even if Greece may be posturing.
2. The U.S. has announced QE2 will come to a definitive end and therefore liquidity will be withdrawn from the U.S. markets.
3. China is combating inflation more aggressively, raising reserve requirements and interest rates.
All three items are deflationary and bearish for risk assets. Commodities and equities are and will continue to get pummeled as this news dominates the market We think gold can also suffer as the dollar strengthens but as long Europe is on the front pages it is likely gold will continue to make new highs against European currencies. In short, gold is competing against the dollar for European safe-haven status.
Market Prices
Technical Analysis (GRI)
JUN GOLD
The market remains in a short term peaking turnover. However, Fri-Monday’s thrust up from tight congestion, alerts for secondary rallies. Look for attempts to continue climbing rallies with a chance to stretch rallies to a test of 153350*. A close over 153350* should launch secondary drives against the last swing high. Stalled action along 1515-1500 hints for a reversal. A close under 148930* will likely renew selloffs to 145690*.
JUL SILVER
The market remains bearish and still calls for selloffs to attack the last swing low and 3285 target. Any corrective congestion capped by 3673* will bear flag and by mid week lead to renewed selloffs. A close under 3285 is negative and could add a wash to 3100-. A close over 3673* is needed to motivate a sustained recovery back up near 3900.
JUL COPPER
Last week’s rebounds were rejected by 41195* resistance. A close over 41195* or thrust over 416 confirms a reversal and should fuel a retracement climb to 423-425. The back off from 41195* hints for a bear flag downturn and secondary selloffs against the recent swing low. Expect further selling pressures to test 39645*. A close under 39645* confirms a drop to 389-38535.
In the News
Bloomberg (Reported 5/24/2011)
Gold gained for a third day in London as deepening concern over Europe’s sovereign debt crisis spurred demand for the metal as a protection of wealth. The Greek government endorsed an accelerated asset-sale plan and 6 billion euros ($8.4 billion) of budget cuts to win extra aid. Fitch Ratings yesterday lowered the outlook on Belgium’s credit rating to negative, following Standard & Poor’s May 20 announcement that Italy’s debt rating was at risk of a downgrade. Bullion climbed to a record priced in euros. Gold Advances for a Third Day as European Debt Crisis Buoys Haven Demand
Reuters (Reported 5/24/2011)
Gold rose to a two-week high on Tuesday as concerns about a spreading EU debt crisis fueled safe haven buying, while a softer dollar provided support. Spot gold hit $1,523.30 a troy ounce, its highest since May 11. It was bid at $1,520.80 an ounce at 1149 GMT from $1,516.05 late in New York on Monday. Gold hits two-week high on euro debt worries
NSFutures (Reported 5/24/2011)
June gold managed a fresh new high for the move overnight and was probably helped higher on the charts by weakness in the Dollar, residual concerns of debt contagion problems in Eurpoe and some revival of energy prices. Apparently the gold market wasn’t overly concerned about talk that higher gold prices prompted some softening in Indian gold demand overnight. Global equity markets traded higher during the overnight and early morning hours, with mixed to higher results in Asia and higher European indices. This has helped US equity markets stage a rebound from Monday’s weakness, and they are on track for a higher Wall Street open. Daily Metals Commentary.
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