Sharp fluctuations in metals markets, as demand powers start to rise

Yesterday, we witnessed sharp fluctuations in the precious metals markets, but tending to decline during the U.S session. Nevertheless, we witnessed some upside bias affected by buying pressures following the decline on good entry levels.

The U.S. reported a steep slowdown in the housing sector's performance, triggering strong profit taking waves and risk aversion which supported the U.S. dollar and sharpen the bearish trend for metal; metals recovered most of their losses, where yesterday silver and platinum settled in New York with some gains.

Yesterday, silver settled in New York with an incline by 0.92%, after the sharp decline seen in the session, which reached the low of $32.83 per ounce, but demand strengthened after the sharp decline which was an incentive for silver to incline and close at $33.91 per ounce.

Platinum also inclined after reaching the low of $1745.00 to close at $1767.00 per ounce with an incline by 0.80%. Gold wasn't that lucky yesterday, where it closed with a decline by 0.19% in New York at $1487.00 per ounce. We shouldn't ignore the low set for gold at $1471.00 during the U.S. session, whereas in London gold was set in the P.M. Fixing at $1478.50 per ounce which shows that gold found some demand after the decline.

The U.S. dollar exchange rate played a critical role in moving the precious metals markets, where we witnessed heavy fluctuation during the session as the dollar appreciated on the pessimistic sentiment following the downbeat housing data, as the housing starts in April slumped 10.6% which had a negative effect on the U.S. markets, and drove haven demand towards the dollar.

Yesterday, U.S. dollar index inclined to reach 75.82 points, but also declined sharply to reach its lowest at 75.33 point, where the decline added positivity to the metals markets and encouraged investors to buy the metals at dips.

For today's trading, we witnessed an upward wave in the metals market, where silver inclined by 0.94% to trade now at $34.23, gold also inclined by 0.24% to recover yesterday's drop, gold is trading now at $1490.60 per ounce. As for platinum, it increased today by 0.17% and is trading now at $1770.00 per ounce, these prices are as of 02:45 EST (06:45 GMT).

If we looked today at assets and commodities prices worldwide, and at the USDIX which gauges the dollar's performance against the six major currencies, we will find that they are supporting the continuous bullish wave for precious metals.

Yesterday, U.K. data indicated that inflation surged to 4.5% on the year in April and to 2.8% in Europe, and is still increasing in China, the United States and several other countries, where the optimistic sentiment dominated Asian markets today. All of this is considered a supportive factor to speculative demand forces in the metals markets, and demanding gold as a safe haven.

For gold, the critical factor is the dollar's trend and the futuristic inflation expectations in the world. Current signals are for a weaker dollar accompanied with major rise in inflation pressures, which will keep positive demand on gold evident over the coming period.