Narrow trading might end the week with gains
Metals are trading within a very narrow range since yesterday in NY; where gold closed at 1059.80; silver followed at 17.64; whereas platinum closed at 1366.00. The narrow trading had reflected traders’ uncertainty in whether they should invest in stock markets that have returned to gains yesterday in NY, or in numerous other rising commodities which surpassed precious metals that also continue rising despite trading within a narrow range.
The Asian trading session today also witnessed precious metals trading within a very narrow range, leaning towards some gains that were inline with the dollar's fragility against a basket of major currencies. The yen also plummeted, showing that the appetite for risk caused a dollar selling wave and on the yen in search of higher yielding assets.
Gold is trading at 1062.00; silver followed at 17.66; whereas platinum is also trading at 1369.00 as of 02:28 EST.
Meanwhile, traders headed into stock markets, which were and still are a strong investment opportunity, according to numerous traders. China was capable of proving their strength after expanding by 8.9% in the past quarter; thus, spurring optimism that the global economy is very close to exiting the economic recession and shaking off the credit crisis, supported by interventions and of stimulus measures from governments and central banks to exit this recession.
On the other hand, crude oil rose to levels nearing $82.00 per barrel; whereas commodity indices continue their gains despite the minor fall that was seen yesterday. However, we still see indices trading near high levels in over a year; the S&P GSCI index closed at 523.33, highest levels it a year.
Jitters are currently rising over rising inflationary risks over medium and long terms, thus attracting numerous investments towards precious metals. At the same time, we currently see very low inflationary levels in major countries, which also provide investors and speculators a good chance to slightly move away from precious metals and head towards higher yielding investments.
On the other hand, corporate earnings for the third quarter appear to be generally positive, proving that the global economy is indeed improving, which pushed investors to exploit any share trading in the green on the board. This is negatively affecting precious metals, even though we do no see any overselling waves, which proves that many investment portfolios and traders have a tight grip on their precious assets; where it is a combination of both an investment and hedge against possible inflationary risks over the medium and long terms. Meanwhile, many portfolio managers are still have dollar woes and the negative effects on the currency's purchasing power, which in this case reduces its purchase power for profits, treating this case by purchasing gold as a hedge against the depreciating currency's purchasing power.
In regards to precious metals over medium and long term; rising commodities, depreciating dollar, and global economic improvements combined with low interest rates and irregular central bank policies, are all causes that could fuel an inflationary bubble that might explode at once. This makes us expect that precious metals are going to continue rising.