London Bullion Report: Gold & silver closed little changed having touched multi-week highs

London, 02 September 2010 - Gold hit a fresh two-month high and silver its best in 3-months yesterday before reversing their gains as upbeat manufacturing data sparked a rebound in risk appetite. Equities globally staged a broad rally following stronger than forecast ISM readings from China, the EU and US; the Nikkei gained 1.1%, the STOXX50 3.5% while the Dow and S&P500 finished up 2.5% & 2.8% respectively. Commodities were also in positive mood despite gold and silver reversing their gains, the CRB Index closed up 1.6%.

Stock sentiment remains positive so far this morning; currently the Nikkei is up 1.3% and the MSCI Asian Pacific Index 0.75%, ahead of data showing Swiss and EU GDP, Eurozone PPI, US Jobless Claims, Pending Home Sales and Factory Orders. The ECB is expected to keep interest rates unchanged however the focus will be on the strength and tone of J-C Trichet?s statement; Fed Chairman Ben Bernanke is due to testify before a congressionally created panel charged with investigating the causes of the 2008 financial crisis.

Currency flows reflected the increase in risk appetite yesterday with the dollar and yen declining; the DXY settled down 0.3%, the yen declined a similar amount versus the greenback and 1.25% against the Euro. A more cautious tone has been seen so far this morning the Dollar Index is currently little changed; EUR/JPY is down 0.2%.

Bullion prices saw a positive start, rising across European trade to set the days highs on the US opening. Gold touched $1254.75 and silver $19.51; the announcement of strike action at Northam Platinum lifted platinum to $1538 while palladium traded to its best since mid-May reaching $527. Holdings in the SPDR gold ETF and iShare silver ETF increased 1.5-t and 1.7Mozs yesterday however the increase in risk appetite led gold and silver to reverse their gains closing little changed, the PGMs shrugged off poor auto sales from the US with platinum closing up 0.5% and palladium almost 3%. Further resistance around $1250 is likely to cap gold short-term however we expect the metal to remain underpinned by investor diversification and potentially look to challenge the all-time high in the coming sessions.

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