Gold, silver and platinum have been very volatile since trading began on Sunday night this week, highlighted by 
sharp selloffs that were followed by short-covering led rallies. Liquidations of ETF positions, purchases of bearish option strategies and rumors of producing selling have weighed heavily on gold again this week.
Silver led the complex lower when trading resumed yesterday, as sell stops were triggered in both the electronic and OTC markets when silver failed to hold $22.00. Volume was not particularly heavy with approximately 3,000 futures contracts trading on the electronic platform, as silver plummeted 10 percent, trading to a low of $20.25 on the active July futures contract. Gold, silver and platinum rallied sharply over the next few hours as physical demand in Asia, short covering and perhaps some fresh buying accounted for more than 50 percent of the intraday losses being erased.
The strength and rally of the USD continues this morning and is weighing heavily on our market. The Euro is now trading at 1.28 and the USD basket futures contract is trading near a one year high, as precious metals are being pressured from liquidations and speculators trading from the short side.
With physical demand slowing down throughout the Asia Pacific region this week, precious metals prices became more vulnerable to another downside move which took place overnight. As a quiet trading day in Asia was coming to a close, gold came under pressure, and when it failed to hold $1,420.00, sell stops were triggered in both the OTC and electronic markets.
Precious metals opened higher yesterday in the Asia Pacific region, but a report released early in their day highlighting decreased demand for crude oil in China led to selling in energy products and precious metals, followed quickly with sell stops being triggered on the electronic trading platform when gold failed to hold $1,440.00.
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Precious metals are sharply lower this morning led by gold, as gold, silver and platinum have fallen below their 10-day moving averages. While physical demand continues to be good, it has not rivaled what we have seen over the past four weeks and in the case of gold, it slowed down noticeably every time gold tested and failed to break through resistance above $1,475.00. This led to increased speculator confidence to trade from the short side, as failures above quickly led to gold backing off to $1,440.00 – $1,450.00.
After testing and holding support in the low $1,440.00s yesterday morning, gold rebounded on the combination of physical demand and short covering. Overnight markets were very active, as physical precious and base metals were in demand throughout Asia. Figures released overnight show China imported 223 tons of gold in March with 130 tons coming through Hong Kong.
With tensions rising in the Middle East, gold is trading higher this morning along with crude oil, but continued weak economic data in China appears to have weighed on the rest of the precious metals complex along with base metals. Technical trading may highlight the early part of the trading week, as precious metals, led by gold, look for direction. Support in gold should be found at the 10-day moving average of $1,460.00 and again at $1,440.00, which was last week’s low. Resistance appears to be stiff from $1,480.00 – $1,485.00.
Today is May Day and with most of Asia and Europe out for the day, the lack of physical buying to support the market has been very apparent. Early U.S. trading sees all four metals recording sharp losses which began with selling in silver during the London morning when it failed to hold $24.00. Gold and the PGM’s followed suit and as I finish today’s commentary gold is testing $1,450.00. Today brings us the conclusion of the 2-day FOMC meeting with a decision due at 2:00PM EST.
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Precious metals are higher across the board this morning led by platinum, which is now trading to a $40.00 premium to gold on news that a new platinum ETF is being brought to the market by South African bank ABSA. While physical demand shows no signs of slowing down, prices are likely to face an uphill battle during the first half of the week, as ETF selling and short-term profit takers in gold hang over the market.
