Precious metals remain firm in European session as USD weakens and interest rates should stay low in advanced economies for some more time. Benchmark contracts for gold and silver rise for the third consecutive day, the longest winning streak in a month, to 1133 and 17.55, respectively.
The Fed's statement sent the market a signal that interest rates will stay low in the medium-term. The 10-year Treasury yield fell to 3.64%, the lowest level in a week. Lower bond yield benefits gold and it reduces the opportunity cost to invest in the yellow metal. In Japan, the BOJ voted unanimously to keep the unsecured overnight rate at near 0.1% and decided at the split 5:2-vote to double the size of the funding operations, launched last December, to 20 trillion yen. While market reaction was not too vigorous, the reinforced low-rate environment supports gold.
Platinum stays steadily in the uptrend and current price at 1639 is the highest level since January 20, while palladium extends gains to 478, just a few dollars below the decade-high. Further price hikes are likely given strong fundamentals and robust investment demands. In the fundamentals news, Eskom, the state-owned power and utility company in South Africa, said that power supply could become a major concern from 2011. Power shortage issue will be worsened by the World Cup which begins in June. South Africa is responsible for around 80% of platinum production and 35% of palladium production in the world. Supply constraints should exacerbate the PGM market which is expected to tighten as demand from automakers rebounds.
Crude oil advances to 82.5 with OPEC's decision to keep production quotas unchanged priced in. Oil ministers seemed to be satisfied with current price level. Ali al-Naimi, Saudi Arabia's oil minister, said that the market is having 'good demand, reliable supply and beautiful prices'. Other member countries including Iran and Venezuela also believed there's no need to adjust output.
The dollar's weakness is broadly based except against the yen. What's eye-catching today is the GDPUSD which rallies to 1.538, the highest level in a month, after stunning employment data. Claimant count surprisingly dropped -32.3K in February, translating into a lower rate of 4.9%. The market had anticipated the Claimant rate to stay flat at 5%. The 3-month average ILO unemployment rate was flat in January, compared with forecast of a rise to 7.9%.