New all time highs for gold and more is still expected...
The S&P GSCI index surged yesterday to set the highest in almost a year, reaching its highest since October 2008 to end trading at 488.26 after recording its highest at 492.16 points. Crude's sharp rise was one of the major driving reasons, alongside Morgan Stanley upside expectations revision for copper, zinc, and nickel prices for 2009 till 2012. Crude managed to stabilize yesterday above $74.00 per barrel but today we see it entering the $75 areas to reach its highest in nearly a year.
The rise included a number of commodities across the globe and their main indices, despite some hints from China that they might ease their commodity production, as they see demand is still sluggish. Despite of the statement, Intel’s earnings, alongside expectations for an upbeat earnings season gave traders reasons to expect the global economy's improvement to continue, where improvement surpassed many expectations. Even though major economies are slightly improving and stabilizing, compared to their performance before the credit crisis, the improvement which is currently being seen is considered to be very positive; driving investors to head towards commodity markets amid rising demand expectations.
Precious metal rose significantly yesterday, continuing the upside swing into today’s Asian session. U.S. equity indices declined yesterday, alongside some Asian indices today, pushing investors into commodity markets to claim profit and thus fueling a new buying wave on precious metals.
The dollar declined noticeably against a basket of foreign currencies yesterday, which added a new reason to why precious metals are rising. Combining the surge seen in commodities alongside the dollar's decline, it assures that investors fear a major surge in inflation levels might in deed materialize; especially with the improvements the global economy has been witnessing lately. Current inflation levels are very low, where yesterday's data revealed the rapid pace of decline in the UK. This does not halt expectations about inflation levels rising over the long run with the rise commodities have been witnessing, alongside the dollar's drop. Low interest rates and central bank’s unorthodox measures joint with the government incentives are all reasons supporting the possible huge spike in inflation levels throughout the upcoming years.
Gold rose yesterday recording its highest at $1066.50 to close at 1064.10 in New York setting a new all time high. Demand increased on gold as a hedge against the dollar's depreciation and rising inflation expectations. Speculative demand also managed to rise with surging commodities and slumping equities; that supported gold's 0.70% rise by NY’s closing, despite of its drop in London as the PM Fixing has dropped to 1057.50 from the AM Fixing at 1064.50.
Meanwhile, silver rose to close at 17.78 in New York rising by 0.34%; whereas platinum was the highlight of yesterday's trading, where it gained by 1.57% to close at 1356.00. Of course, platinum is one of the metals that go into numerous productions, and this earnings season is likely to reflect improvement in the global industrial and manufacturing sectors, which in its role supports platinum's rise. Nevertheless, China said they intend to lower their steel production; thus spurring fears of China cutting back in a number of their industries as they see that production surpasses demand, which is why platinum did pace gold and silver to the upside today.
Gold inclined today and is trading at 1068.00 precisely as of 02:23 EST, the metal is clearly still biased to the upside consolidating around its historic highs. Meanwhile, silver managed to noticeably rise in the Asian session by 1.18% from its opening levels at 17.99. Platinum, on the other hand, is suffering from China's downbeat comments where it was rather unchanged higher only by 0.07% to trade at 1357.00.
Today, gold is expected to continue acquiring new historical prices, where silver and platinum are also going to continue rising. The medium term outlook is still clearly bullish for gold and some expect it to surge towards $1500 per ounce over the medium term. Yet, over short and intraday basis and despite our bullish expectations, we still foresee heightened volatility and fluctuations as the metal lingers in historic high levels and a strong profit taking wave might be triggered at any second now…