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Precious Metals

Gold pushed slightly higher in Hong Kong on Monday, but there was little further action until early in the second hour of New York trading, when the metal suddenly went vertical, busting through the $900 barrier, adding $15 in less than a half-hour and topping out at $907, but that was it for the day, as it eased through the rest of the Comex and the Globex, to finish at $903.20/oz., up $17.40. Overnight, gold is slightly lower.

Platinum got the same morning ignition, but it rode the updraught all the way through the day, barely coming off its intraday highs late in the Globex to end at $1118, up $29. Overnight, platinum is trending higher.

Silver blasted off at the same time, as well, and it continued to push higher through the Comex, peaking at $13.14 before falling off modestly on the Globex and closing at $13.03/oz., up 53 cents. Overnight, silver has been flat.

The precious metals began the new week in banner fashion, with all of them crashing through key levels, gold breaching $900, platinum pushing past $1100, and silver edging over $13.

The usual suspects probably played their part, with oil rising again and the dollar getting slapped down.

“Gold is being influenced interchangeably by the dollar and equities,” Yide Futures Brokerage Co. analyst Yang Zhenqiang said. “It’s still trading within a tight, narrow range and may take both dollar and equity weakness to drive it over $900.”

But, as Bloomberg pointed out, of potentially greater influence is the upcoming release of bank stress tests, for which traders may be positioning themselves.

“The tests may signal whether 19 top financial firms need more capital to withstand economic disruptions. The Federal Reserve plans to make the data public on May 7, the same day as a possible interest-rate move by the European Central Bank. Some investors buy precious metals as a haven from economic turmoil,” Bloomberg wrote.

Bayram Dincer, a Dresdner Bank commodity analyst in Zurich, is convinced. “This week’s ECB interest-rate decision and U.S. bank stress-test results will dominate the action in the gold price,” he said. “Gold will retest $910 an ounce resistance and surpass it. Gold fundamentals are still well intact and are expected to become more price-supportive in the near term.”

Adding to the mix, China may well be buying more gold for its reserves, after revealing recently that it privately increased holdings by three-quarters over the past six years.

Trading in Asia, while limited by a holiday in Japan, “saw gold move sharply higher on reports of Chinese buying from the Shanghai Gold Exchange,” wrote John Reade, of UBS London.

Currencies and Economic News

In the currency market, the dollar was down once again against the euro. Late Monday, the euro was trading at $1.3365, the highest level in almost a month, vs. $1.3268 on Friday.

Good news for the economy turned out to be bad for the buck, as pending home sales rose in March, buoying hopes that the housing downturn may be ending.

The National Association of Realtors said pending sales increased 3.2% in March, more than analysts had been anticipating.

“This is the second month in a row that pending home sales have increased which adds to the overall belief that we are seeing serious signs of stabilization,” said Kathy Lien, director of currency research at Global Forex Trading.

Also factoring in, “Another Wall Street rally is largely seen behind the softer dollar, as risk appetite remains at more elevated levels,” analysts at Action Economics said.

“When risk aversion declines, stocks do well, the dollar falls, the Japanese yen does worse -- and everything else improves,” said David Watt, senior currency strategist at RBC Capital Markets.

The common currency benefited from a report that the pace of slowdown in euro zone manufacturing activity slowed in April, according to data from Markit Economics.

The purchasing managers' index for the eurozone rose to a six-month high of 36.8 in April from 33.9 in March. While readings below 50 are still indicative of contraction in the sector, the report surprised economists, who had forecast the PMI to remain flat.


In the energy market on Monday, crude for June delivery pushed to a better than 5-month high, closing at $54.47/barrel, up $1.27. June reformulated gasoline gained 6.86 cents, to $1.586/gallon.

Traders were upbeat after the home sales numbers and a report out of China that its PMI had also risen, for the second straight month.

It's also “following stocks higher,” said Phil Flynn, of Alaron Trading.

There was a bit of wariness, though, with inventories remaining at 19-year highs and the bank stress tests looming.

“We are somewhat apprehensive about price prospects for energy over the short term in light of the stress-test results due to be announced later this week,” said Edward Meir, of MF Global.

“Both the commodity and equity markets have already pushed substantially higher in response to the slight improvement in the macro statistics,” Meir added.

Base Metals

The London exchange was closed for a bank holiday yesterday, interrupting our data feed on the base metals. We will resume coverage on Wednesday.

That’s what’s happening … see you tomorrow!


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