Precious metals slide on payroll number

James Moore - Analyst, james.moore@thebulliondesk.com
Friday, Jul 03, 2009

London, 03 July 2009 - Pre-holiday book squaring and risk aversion in reaction to June's weak payroll reading weighed on commodities and equities yesterday with the Dow closing down 2.6%, S&P off almost 3% while the CRB Index lost 2.1%. Short covering in the dollar led the greenback to finish the day up just over 1%, back above 80 while overnight EUR/USD has dipped to 1.3927 from its closing level of 1.4006.

While gold was weighed lower by the stronger dollar yesterday the yellow metal was still broadly rangebound, setting the day's high of $941.75 in early Asian before sliding to a low of $926.75 during US trade. Gold is trading slight higher this morning from Thursday's close of $931 and should look to hold the recent $925-50 range as dips are supported by reasonable volumes of investment demand. However, we still believe gold is vulnerable to a deeper correction in the short to medium-term and will need to come lower to stimulate renewed institutional level investment demand as well as interest from the physical sector.

Silver finished Thursday 2.9% lower as the metal failed to hold ground above the 100-DMA. Support has been seen around $13.40 this morning but the metal could extend lower in the coming sessions to the $12.90 area.

Platinum and palladium were dragged lower by the rest of the precious complex yesterday, posting declines of 0.9% and 1.2% respectively. Overhead resistance around $1205 and negative momentum indicators suggest the platinum could test lower short-term although we expect good scaled down support from background fundamentals factors and longer-term investors. Palladium is vulnerable to short-term weakness however improving fundamentals and substitution from platinum could see the metal retest of the $258-62 area.

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