Stock Markets Steal Liquidity from Precious metals!

U.S. corporate earnings are optimistic; where Intel Co. and JPMorgan started the season on the upper end with positive and better than expected earnings; that supported investors’ upbeat expectations toward the U.S. economy which is advancing steadily towards recovery. That pushed the DJIA to surge above the 10,000 mark closing at 10015.86 rising by 1.47%; NASDAQ and S&P GSCI indices also notably advanced, thus pushing investors into stock markets as the risk appetite strengthened following the positive earnings.

The liquidity flowing into stock markets eased the demand on precious metals, where profit-taking eased the acquired gains by precious metals yesterday. Gold managed to reach 1068.20 to return and drop to 1062.70 losing 0.13%; silver also fell from its highest at 17.96 closing at 17.88. However, this drop does not mean that yesterday's trading was not positive and moved bullish, where metals gained by 0.56%. As for platinum, it also managed to follow silver's footsteps falling from its highest at 1368.00 to close at 1359.00, where yesterday's overall rise was by 0.22%.

Precious metals started with dim performance today near their highest levels; where we see gold trading at 1061.80, precisely at 02:42 EST; silver is trading at $17.84 per ounce; whereas platinum is trading around $1356.00 per ounce.

As for the dollar; it slumped during yesterday's trading against a basket of foreign currencies around the world; whereas crude managed to reach the borders of the $76.00 areas, where it is trading above $75.50 per barrel. Crude’s rise alongside the dollar's plummet is a reason behind investors heading towards precious metals. On the other hand, surging global stock indices, which prevailed into the Asian session today, shifted the focus upon equities, which are enjoying lucrative profits this week reaffirmed by economic fundamentals and corporate earnings that highlight the global economic recovery.

Despite of the liquidity seen exiting precious metals, we still see gold trading near its historical high, at a time where silver is also trading near its highest levels since august-2008; while platinum follows and is trading at its highest since September-2008. The main reason behind major fluctuations in precious metals is merely from speculative demand, which is affected when new investment opportunities arise. However, numerous central banks around the world, alongside many investment bodies and hedge funds, demand gold as a hedge against the dollar's drop and fears of surging inflation over the coming period.

In the meantime, stock markets have been strongly bullish in the past few days reducing the appeal of precious metals. At the same time, precious metals are gaining their fair share of investors, speculators and jewelry buyers. All of this keeps our medium term expectations intact for more upside gains for precious metals. Meanwhile, the intraday and short term outlook remains volatile with possibilities for bearish corrections due to diverted liquidity towards stock markets, taking advantage of its outstanding performance.