Fundamental Precious Metals (2011-03-01)

<h3>Gold's best monthly gain while copper today drops the first in four-days</h3>
By @ibtimes on

Gold's best monthly gain while copper today drops the first in four-days

The precious metal successfully capped their best monthly gain since April 2010, as they continue to hover near the highest levels since November 2009 as violence in Libya persist, spurring investors demand for alternative investment and wealth preservation.

Gold is also affected by inflation threats around the world, where gold is considered the best hedge against inflation. Spot goldis trading around $1,413.55 an ounce, compared with the opening levels of $1,411.02 an ounce while setting a high of $1,415.25 an ounce, and a low of $1,409.27 an ounce. Gold futures rose 0.35% or $4.900 to trade at $1,414.800 an ounce.

Libya's political unrest persist into another day. The precious metal is heading for the longest weekly gain in almost half-a-year as investors hedge against inflation and seeking wealth preservation.

Both the US and European countries stepped up their support for the Libyan uprising, imposing further sanction on President Muammar Gaddafi and his regime; on the other hand, Gaddafi accuses the US of planning to occupy Libya.

The US and EU countries planned a no-fly zone over Libya, in addition, US naval and air units were repositioned in the Mediterranean.

Another influencer on gold prices remains the price acceleration and especially in Europe. The ECB's rate decision Thursday will discuss inflation levels that overshot the bank's desired rate of 2.0 percent for the second consecutive month.

Yesterday's CPI estimate from the Euro-Zone showed that inflation continued to hover at 2.3 percent in February, while lower than the previous and the expected 2.4 percent.

Analysts predict that the bank will preserve its rate at 1.0 percent; however, ECB President Juan Claude Trichet noted that the bank will not hesitate to increase rates if needed in order to control inflation levels.

Nonetheless, safe haven demand managed to increase specifically since oil prices are expected to rise; therefore, hedging against inflation remains the main theme for trading in gold as higher oil prices usually are reflected in higher inflation levels.

Technically speaking, the metal's trend remains to the upside as far as the support at $1,389.00 an ounce remains intact, while the SMA 100 support level is set at 1,374.00 an ounce.

Gold's trading remains above the support at 1,400.00 an ounce, where if breached it will pave the way for the pair to test the above mentioned support level, but the general trend remains to the upside with targets set at 1,425.00 an ounce.

Dollar Movement & Major Market Data:

The US dollar index, which tracks the performance of the dollar against six-majors, traded at 76.821 compared with the opening levels of 76.933, while setting a high of 77.007 and a low of 76.795. The dollar holds an inverse relationship with commodities since they are dollar denominated assets.

The S&P GSCI index closed at 690.85 after gaining 0.29% in trading from the opening levels of 698.16, while Reuters Jefferies CRB index traded higher by 1.29 percent closing at 352.58 levels.

As for metal Fixes (Feb 28); Gold fixed at AM Fix was set at $1,409.75 an ounce while the PM fixing (Feb 28) was set at $1,411.00 an ounce; meanwhile silver fixing was set at $33.490000 an ounce and Platinum AM Fixing (Feb 28) was set at $1,807.00 an ounce, and at 1,804.00 an ounce during the PM fixing (Feb 28); finally ending with Palladium AM fixing set at $790.00 at (Feb 28) AM fixing, while the PM fixing (Feb 28) was set at $790.00 an ounce.

Other Metals

Silver for immediate delivery traded at $33.98 an ounce compared with the opening levels of $33.86 an ounce, while setting a high of $34.17 an ounce and a low of $33.79 an ounce. Silver future contracts traded higher by 0.61% or 0.205 to trade at 34.025 an ounce

Platinum for immediate delivery traded lower by $3.00, at $1,802.00 an ounce, while Palladium gained by $4.0 to trade at $796.00 an ounce.

Copper dropped for the first time in four-days on speculation that demand from China; the metal's number one consumer, would drop as buyers hold off purchasing the metal in anticipation for lower prices.

At 3:13 EST, Copper futures dropped 0.38% or $1.700 to trade at $447.950 per pound. China's manufacturing sector expanded at the slowest pace in half-a-year in the month of February, following the government's action of raising borrowing costs by 0.50%, aiming to cool down inflation and sustain the rapid expansion in the economy.

Join the Discussion