Gold holding near high, keeps eye on dollar

James Moore - Analyst, james.moore@thebulliondesk.com
Friday, Nov 20, 2009

London, 19 November 2009 - Gold and the rest of the precious complex came under pressure across the early parts of Thursday's trading day as the dollar rallied on concerns the current risk rally was overdone, however the metals recovered lost ground later in the day as the greenback reversed its gains with the EUR/USD cross holding the recent 1.48-50 range. As a whole though investors appeared more cautious with the CRB Index ending the day down 0.7% and the Dow off around 0.9%w while treasury yields declined.

With a sparse day for economic data players may continue to air on the side of caution today, as year-end and the holiday season begins to loom into focus with US market shut part of next week for Thanksgiving. Data today will show German PPI and see speeches from Buba President Weber and ECB President Trichet.

Gold held its ground across the early part of Thursday, trading $1140-46 before eventually slipping lower in the European session as the dollar advanced. The metal slipped back to $1133 but recovered as the US session got underway as fresh buying interest emerged. The firmer dollar saw gold edged lower again as trade in Europe drew to a close, posting a low of $1130 however gold firmed later in the session as the dollar gave up its gains, closing little changed at $1142.50. Gold is again showing signs of fatigue after posting an impressive rally over the past few weeks. We will be looking to the dollar for further direction with strength in the greenback likely to trigger profit taking in gold. However with the Fed likely to keep rates at low levels for some time to come we maintain our bullish outlook over the mid to longer-term and will ultimately look for the metal to push deeper into uncharted territory.

Silver continued to track the movements made by gold yesterday, dipping to a low of $18.16 in European and US trade before firming back to $18.48 by the close. The influx of ETF interest over the past week is a sign investors are looking to cheaper alternatives to gold, however the yellow metal will continue to provide much of the metals direction in the coming sessions with a dip below previous resistance at $18.10 potentially prompting long liquidation.

Both platinum and palladium closed lower yesterday but off their respective lows of $1425/361, settling a $1438/367. The PGMs are likely to move broadly inline with the rest of the precious complex in the coming session however we expect corrections to be limited as dips continue to draw good levels of investment buying interest. On the charts support for platinum is pegged at $1410/1390 and around $345 in palladium.

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