Precious metals consolidate as traders await payrolls reading

James Moore - Analyst, james.moore@thebulliondesk.com
Thursday, Nov 05, 2009

London, 06 November 2009 - Thursday was all about rate announcements as both the Bank of England and the ECB followed the Feds lead leaving base rates unchanged at 0.5% & 1% respectively. But as with the Federal Reserve the focus was more on the strength and tone of accompanying statements as both banks signalled they would start to withdraw emergency measures after Jean-Claude Trichet announced the withdrawal of some liquidity operation and the BoE slowed its bond purchase programme. Both Sterling and the Euro gained as a result however the Dollar Index finished down only 0.1% as traders remained cautious ahead of today's NF Payroll release.

Equities posted solid gains yesterday as traders and investor interpreted the ECB/BoE actions as a suggestion the broader economic picture was improving. Both the Dow and S&P gained in the region of 2% while markets have been bolstered overnight after the Reserve Bank of Australia suggested the Australian economy would expand at 3-times the pace forecast in August. Currently the Nikkei is up 0.7% and the MSCI Index 1.7%.

The focus today will be on US Non-Farm Payrolls forecast to decline 173K. Other data will show UK PPI, German Factory Order and US wholesale Inventories. In addition G20 finance ministers begin a 2-day meeting to discuss the economic recovery and budgetary & trade gaps.

Gold saw a relatively flat day yesterday, consolidating in a $10 range. The metal posted both the days high ($1094.30) and low ($1084.70) in European trade and closed slightly lower at $1089. Direction today will depend largely on the US payrolls reading later with a better than forecast reading potentially fuelling increased risk appetite and pushing gold to new highs above $1100/oz in the coming sessions. The risk though is for a weak reading which could trigger a correction in equities and put gold under pressure.

Silver closed down just 5-cents at $17.37 after trading $17.21-53. As with gold short-term direction for silver will depend very much on todays economic data. Further overhead resistance is expected towards last month's high of $18.11 while a move below 62 in the ratio could give the metal a lift towards $19/oz.

Platinum saw a mixed day yesterday posting a $15 range between $1350-65. Palladium was in a similar mood trading $326.50-32.50. Both metals appear comfortable at current levels but may look to challenge recent highs at $1371 & $340 should today's data continue to support an improving economic outlook.

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