Gold still eyeing $1,600/oz following rally but PGMs stall

Gold remained elevated on Wednesday morning despite drifting slightly lower in early European trading, retreating from the peaks of Tuesday’s sharp rally of just below $1,600.

Spot gold was last at $1,590.65/1,591.50 per ounce, down $1.60 and just fractionally above the trading range of the past fortnight, having peaked at $1,598.75 during Tuesday’s session.

“Gold finally broke above the stubborn $1,585 resistance, triggering a plethora of stops between $1,585 and $1,592 and catching out those who went short following the [forecast-beating US non-farm payrolls number] last Friday,” Alex Thorndike of MKS Capital said.

The market remains very short, he added: “A close above $1,600 could begin to cause further pain for shorts and stoke further covering.”

Also supportive for gold, Bundesbank president Jens Weidmann has stoked fears over the stability of the euro.

“The crisis is not over despite the recent calm on financial markets,” he said in a statement to reporters, also casting doubt on the course of reform in Italy, Cyprus and France.

The German central bank had set aside billions of euros in new provisions against what Weidmann sees as a high-risk promise by the European Central Bank to buy bonds from troubled nations, thus lowering their lending rates, he said.

His statements kept the euro under pressure – it was last at 1.3010 against the dollar, around a tenth of a cent lower.

While gold exchange-traded fund (ETF) holdings continue to decline – a source of downward pressure on the metal recently – the rate of decline appears to be slowing, Thorndike said, pegging support around $1,585/1,587, with major resistance at $1,600.

Investors are looking ahead to US economic indicators set for release later today, including February retail sales data.

Released so far, European numbers have done little for the outlook on the continent – the French consumer price index was below expectations at 0.3 percent and the fourth-quarter non-farm payrolls for the same country fell 0.3 percent quarter-on-quarter. European industrial production for January fell 0.4 percent following an increase of 0.9 percent in December.

Equities are lower this morning – the FTSE 100 has given back 0.7 percent and the DAX is slightly softer. In Asia, the Hang Seng is 1.5 percent lower and the Nikkei is down 0.6 percent.

In industrial commodities, three-month copper is down $5 at $7,825 per tonne on the LME, while Brent crude oil is up 16 cents at $109.76 per barrel despite the International Energy Agency lowering its demand forecasts.

In other precious metals, silver is down 12 cents, following gold lower. The platinum group metals also handed back gains, with platinum at $1,588/1,593 and palladium $4 lower at $766/771.

“The PGMs seem to have stalled for the time being, platinum having great difficulty moving through and holding above the 100 day moving average at $1,611.50, whilst palladium is due for a bit of pullback before an extension to $800,” MKS Capital’s Thorndike said.

(Editing by Mark Shaw)

Will Adams

About Will Adams

William Adams has been involved in the metals markets since 1982 – he has experience in many areas of the market from researching to trading and has worked in London, New York and Tokyo.