Narrow trading for precious metals yet expectations remain to the upside

After the rapid incline witnessed lately, metals started to steady within relatively tight ranges in a consolidation area. Silver fluctuated the most during the same time period yet was still confined within a sideways trading range as investors are holding their positions after the buying saturation had pushed prices higher. With expectations of further gains for the metals, we still see investors engaging in profit taking transactions from time to time.

The profit taking wave that occurred yesterday came alongside a strengthening dollar and steady crude prices below 69 dollars per barrel which encouraged spot traders to lock in on their profits as they believe that heavy movements in both the dollar and crude prices will take a toll on metals.

Gold slumped 0.55% in New York yesterday to end the day at 999.60 as it closed higher than London's 999.25 closing from the opening price of 994.25 dollars per ounce. Platinum also slipped 0.15% in New York to 1315.00 yet also higher than London's closing of 1309.00 dollars per ounce. Concerning silver, it declined the most as it was down 1.14% yesterday in London as it was the victim of heavy trading within the narrow ranges resulting in high volatility.

As for today, we see slight profit taking transactions within the range trading which slightly took metals lower where gold is currently trading at 996.50 whereas silver is at 16.49 and platinum remains above the 1300.00 mark at 1308.00 as of 02:32 in New York.

The current sentiment in the markets is that global demand is to pick up in the near future yet many believe that the recent rally in metal prices was excessive compared to economic fundamentals. This is resulting in confusion and mixed trading as seen in other markets including the stock markets and other commodities.

Stock indices continued to fluctuate yesterday and today alongside commodity indices which started off mixed yet ended green as the S&P GSCI index was up 1.12 points to end the day at 452.55.

On queue later today, we wait for critical fundamentals that are closely related to precious metals as inflation data is to be released from the UK, US and France. This will come alongside retail sales from the US which will highlight consumer spending behavior whereas from the EU and Germany, the ZEW survey is to be posted. All this makes it hard to determine how the precious metals are to react in the markets on the intraday and short term today and therefore we must monitor the data carefully and remember the direct relationship between inflation and spending with precious metals alongside the relationship between spending and confidence.

On the medium term, our outlook remains the same where an improvement in the global economy will be reflected in demand and therefore push metal prices higher. On the other hand, a deepened recession will increase demand on precious metals, especially gold, as a safer asset which may result in a price incline if the recession has yet to bottom out.

From here we see that all the developments that took place and will take place, will be reflected positively in precious metals on the medium and long term which is also supported by the record low interest rates from central banks and the use of unorthodox measures and stimulus plans.