Precious metals experienced profit taking after 3 straight days of gains. Spot gold broke lower to $1604 only to recover.
Another day brings more speculation of QE3 as the comments from Boston Fed President Eric Rosengren continue to ripple throughout the market. After seeing early profit taking in European trade taking the metal to $1604, it was a quick bounce back as the North American session found buyers. The greenback rose against the euro on Wednesday ahead of government data that may show Germany's industrial output shrank for the third time this year. The dollar drew more strength from the single currency after S&P's move on Greece late yesterday. This after the euro had its own 3 day advance against the U.S. Standard & Poor's Ratings Services on Tuesday revised its outlook on Greece's Triple-C ratings to negative from stable, headlining risks if Greece is unable to secure the next tranche from the European Union and International Monetary Fund bailout package.
U.S data also gave a lift to the dollar, US non-farm productivity for July rose to 1.6% from an expected 1.5%. Preliminary Unit labour costs jumped 1.7%, against a forecast 0.5% and previous 1.3%. The metal has been looking for direction from currencies as it continues to trade range bound.
"Once again today, lacking any fundamental-based impetus, precious metals are largely looking to the euro for direction, closely tracking the currency's every move" Standard Bank said in its daily note.
There isn't much to say as the metal remains in its wide trading range. The metals have lacked direction for a number of reasons, one of which is the summer doldrums which we encounter every year. Don't expect much to change over the next few weeks as we could quite possible test the bottom and top end of the range. We have been asked a number of times when is a "good" time to buy? With that we say it's always a good time to buy, metals are currently in a correction phase now and it's anybody's guess how far this correction phase will take us, but buying is all about your level of tolerance. Look for short positions to be covered if gold pushes and closes above $1640, for silver a close above $29.60 should see good buying.
Spot silver is in the same boat remaining in its own range, testing the top side of $29.28 before tailing off. The Dow Jones Industrial Average offered the dual role metal little help as gains in the equities were minimal. Again we sit and wait for the next Fed meeting September 12-13, until then expect ranges to get tighter.