Gold: Gold had a fairly quiet day yesterday, prompted by the Labour Day holiday in the US. This morning was a different story when gold, as expected, broke through the psychological $1000/oz level in late Asian trading.
Initially, profit taking was seen at $1004/oz and the price fell back to $1,000/oz prior to rallying to over $1,007/oz. Gold looks very good technically and some investors are putting their trust in gold to see whether it pushes to new record highs just above $1,030/oz. Especially as extremely loose fiscal and monetary policies are likely to create an inflation headache down the road. GFMS report that there have recently been some "significant lumpy transactions" and "a degree of illiquidity" in the physical market which is a development worth monitoring.
With large hedge funds and central banks (such as the Russian and People's Bank of China) diversifying into physical bullion, investment demand remains as robust as ever and looks set to overpower the significant decline in jewellery demand and demand from the Indian subcontinent. The United Nations UNCTAD report warning that the "economic winter" was not over and calling for a new global reserve currency may have led to some buying also. Gold is currently trading at $1005/oz.
Silver: Silver is continuing to surge and is already up by over 2% in dollar terms. This is a new 13 month peak and although silver seems to be overbought at these levels, a massive correction may not be as inevitable as commented on yesterday. If gold holds on to its gains over the $1000/oz level, investors might not be so quick to take profits on silver- to see whether silver can continue to outperform gold or at least mirror its trajectory for the time being.
While silver is overbought by some technical measures the important Commitment of Traders report shows that the silver open interest went up 4094 contracts yesterday to 112,394. While this is a new recent high, silver's open interest high is around 150,000, so it has room for another 40,000 new longs to enter the market prior to the rally being overbought. Silver at over $20/oz remains viable before the end of 2009.
Platinum group metals: Platinum has pushed up to $1,272/oz, palladium is mounting a fresh assault on $300/oz, currently trading at $297/oz and rhodium is at $1,550/$1,650/oz.
Disclosure: No positions