Fundamental Precious Metals (2010-05-26)

Demand for gold has declined 11% throughout the first quarter, due to the high price and change in consumption patterns. The decline, however, did not prevent gold from hitting a record high of 1249.00. Last week's decline has proven to be a result of weaker speculative demand and investment, though this week we can see that gold is back on the rise.

The European debt crisis is feeding safe haven demand on the yellow metal, with growing fears of the crisis spreading to other European countries. This fear was fueled by the instability in the Spanish financial sector and concern in its Italian counterpart. These financial woes in Europe are expected to stall the recovery of the economy in the continent, as more and more countries are adopting measures to resolve high budget deficits.

The huge plunge in stocks that spread through the globe yesterday shows the amount of strain in the markets amid tension in the Korean peninsula, which in turn bolsters demand on gold.

Gold appreciated 0.75% in New York yesterday as it closed at 1201.20 after reaching a high of 1205.50. The same case was recorded in London where the yellow metal ascended from the morning fix of 1189.50 to the evening fix at 1198.25. The positive movement of gold was initiated by demand on a safe haven and alternative investment.

Depreciating euro tuned investments to gold, which made attempts of the rising dollar to force gold down futile. Oil had also disobeyed its usually positive relationship with gold, declining in today's trading.

Silver's gains were more modest compared to gold, as it rose 0.34% and closed at 17.95 in New York while platinum had declined 0.59% to 1518.00 yesterday reflecting weak speculation and a tendency to sell industrial commodities.

Despite green signals from Asian stocks, investors still went for gold to cover any possible losses they might incur as they headed for the stock and commodity markets. At exactly 02:29 the yellow metal is trading at 1205.70 up by 0.37%, while silver had also risen by 0.45% to 18.03 due to more speculation and investment in the market price.

Concern over the performance of the global economy in general and especially the industrial sectors amid the havoc of the European debt crisis and the austerity measures adopted by several European countries like Great Britain and Spain, all contributed to platinum's decline. The metal is widely used in the industrial sector, which is suffering a period of low demand, has thus fallen 0.26% to current prices of 1514.00.

Commodity indices went south yesterday as the S&P GSCI shed 8.33 points and closed in New York at 465.46, while today futures are trading at a rise as in the example of ROGERS INTL which ascended 19.60 to 2879.01. This rise in commodities was triggered by a falling dollar and appreciating oil which is trading at $69.00 per barrel currently above the yesterday's low of $67.00.

Precious metals, especially gold, are benefiting from the ongoing turbulence in the financial markets. This makes us expect a bullish trend over the short-term period, while intraday patterns will depend on the state of the economy and confidence in the markets which may cause a lot of fluctuations.