Profit-taking depreciates metals but still managed to attracts many
Precious metals sharply gained throughout yesterday's trading session, where we witnessed gold recording a new high above $1153.00 per ounce before slightly dropping, but still closing with gains by 0.25% at 1143.40 in New York yesterday. In addition, silver sharply rose as well achieving its highest price at $18.86 per ounce before returning to slightly fall and close lower at 18.56 gaining 0.76%; whereas platinum couldn't hold onto its gains; thus causing it to depreciate by 1.10% and close at $1441.00 per ounce in New York.
Data released from the U.S. yesterday, showed that the house sector is still under major pressures, since we already know that the credit crisis was caused originally by the burst of the U.S. housing bubble. However, yesterday's data showed that housing starts dropped to 559 thousand houses, also affecting building permits to drop to 552 thousand. This data insured that the house market in the largest economy in the world is still suffering, where it has not managed to reach the bottom yet; thus, insuring a weak U.S. economy despite of the possibility that it might be exiting the technical recession!
The U.S. inflation data could be considered as positive, since inflation in fact has reached - 0.2% after prices had risen by 0.3% in October. However, despite of that it does not point to inflation stabilizing or remaining in negative levels anytime soon. On the other hand, the start of prices rising could actually be a positive sign, which could help the economy to stabilize. The mixed U.S. data released yesterday can not be explained by taking each part on its own, but by including annual inflation, as well as the housing data all together; which hints that the U.S. economy remains fragile. In addition, the data also showed a rise in the core consumer prices by 1.7%, which could presently be very negative on consumers that are suffering rising layoffs where the jobless rate surged to 10.2%.
Although yesterday's data caused volatility in financial markets; however, it reflected on other economies around the world and resulted in a profit-taking wave triggering a dollar buy-back wave; naturally affecting crude and causing it to slightly drop. The dollar's strength, alongside the fall in crude comes inline with profit-taking by speculators in financial markets as well; entering metals into a bearish wave after the major rise they recorded yesterday, where the effects carried into today as we witness more depreciation in precious metals.
Gold managed to drop today and trade at $1140.10 per ounce falling by 0.29%, surrendering yesterday's gains at precisely 02:57 EST; silver followed and traded at 18.40, losing more than what it gained yesterday, presently trading down by 0.86% compared to yesterday's NY closing; meanwhile, platinum was able to slightly rise today, but the rise was very limited since it was not able to compensate for yesterday's plummet, where it traded today at 1443.00 gaining 0.14%.
Precious metal's appreciation has hammered jewelry sales; dampening precious metals demand which will pressure prices to the downside. On the other hand, we saw that speculators and investors in the market indulge in profit-taking every time something worrisome occurs in financial markets, which also causes a plummet when any data or signs of a weak global economy appear; hence, also being one of the reasons behind the drop witnessed today.
While, commodity indices rose yesterday we can see them leaning to the downside today, where wide profit-taking seen in financial markets is positively reflecting on the dollar, thus pressuring precious metals to depreciate.
The bearish wave could be seen continuing on precious metals, but we should not forget that there are sides demanding gold and other metals as a safe haven and semi-cash reserves, which keeps the bullish medium term direction intact.
However, what we see now is merely a bearish correctional wave, where we like to remind you that Russia is possibly going to sell 30 tons of gold at the end of this year, not in financial markets but for central banks; thus, showing the strong need for gold. Although the Russian finance minister pointed out that this process will not reoccur in 2010, but since it was necessary now to pay off for the government's budget deficit; keeping gold as semi-cash reserve against global economy fears and a probable plummet of the dollar in the future.