Metals endure heavy losses on markets readjustment!
Metals slumped severely yesterday, where gold and silver suffered the heaviest losses. Gold plunged 3.46% down from the recorded high of 1243.80 to close above 1199.40. Silver also declined from the high recorded at 18.57 to close down by 4.62% at 17.76. Heavy profit taking was seen due to many reasons from liquidations, new positions, eased inflation fears on slumping oil and dollar and many other reasons. Platinum did join the losses ending down by 2.15% to settle at 1500.00
The downside trend was relatively steep yesterday, gold's losses where the most since February 04 indicating the extent of the decline. Gold failed in settling above the historic new high at 1265.00 which ignited profit taking, and we can not forget that the market entered a strong wave of readjustment yesterday, where they dethroned the dollar on signs of waning recovery and gold was under the same attack as investors did not consider haven demand as much as unwinding the heavy appreciation.
With the end of the second quarter, the extensive losses across commodities and equities markets alongside the intensified volatility in the currencies market, the expiration of the second quarter coupled with the new stricken gold high, all extended gold's losses on intensified liquidation and profit taking as investors squared their positions.
The market has been edgy the entire week on renewed fears over the outlook for the recovery, where the spark was from China, the hope of the global recovery, followed by the US economy, the assumed to be standing domino amid the European disarray. The slowing pace of industrial performance, alongside devastation in the US housing market as the government stimulus wanes all awakened the fears.
Though we are awaiting the infamous jobs report from the US economy today, still the market has been pricing the expected 130,000 lost jobs all week which was the heaviest pressure on the dollar. European economies provided signals that their financial system and economies are not as badly hit as projected, and though they remain under pressure, especially the euro, still investors considered shrinking the wide differentials between the upbeat expectations for the state of the US economy and the extent of damage expected for the European continent, and accordingly gold was affected by this equation.
We can not say that the movement seen yesterday was not a resemblance of prevailing jitters and fears that should have sparked gold's extensive gains, yet still as the dollar was moving on extensive haven demand with no backbone of fundamental support of positive outlook, gold followed the same path and accordingly we see that GOLD IS UNDER ADJUSTEMENT AS WELL!
Yesterday the S&P/GSCI lost a heavy 10.97 points to settle at 484.21 while the RJ/CRB index fell 2.31 points to close at 256.21. Meanwhile, crude also suffered the blow, slumping to $72.00 per barrel settling below the $74 areas extending this week's drop to 7.2% so far.
As for today, as of 02:47 EST the metals inclined slightly correcting some of the losses seen; gold was trading around 1208.10 up by 0.73%, while silver was higher by 1.13% around 17.96 and platinum was higher by 0.73% around 1511.00.
We still see that the adjustment in the market sentiment will continue to add more volatility and fluctuation for equities, commodities, and currencies which all will affect metals. We expect the market to consolidate slightly in the European session while still see chances for heavy movement in the US session with the labor figures, especially if they divert heavily from forecasts.