Gold Hits Six-Week High, Silver Surges above $17/oz

Precious metals were off to the races for a part of Tuesday as a gaining euro pressured the U.S. dollar, which in turn lifted gold to a six-week high. The yellow metal jumped 1.7 percent, with silver and platinum rising 3.6 percent and 2.1 percent, respectively.

Crude oil benefited from the greenback’s weakened state as well, rising 1.2 percent toward $80 a barrel. U.S. stocks registered modest gains.

New York precious metal figures follow:

• Gold for April delivery jumped $19.10 to $1,137.40 an ounce. It ranged from $1,115.00 to $1,138.30, which was the highest level since January 20.

• Silver for May delivery soared 59.5 cents to close at $17.064 an ounce. It ranged from $16.330 to $17.105.

• April platinum rose $32.00 to end at $1,576.00 an ounce. It ranged from $1,545.10 to $1,578.70.

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,126.50 an ounce, which was an increase of $12.50 from the price on Monday. Silver rose 7 cents to $16.570 an ounce. Platinum was settled at $1,562.00 an ounce, rising $14.00.

Notable bullion quotes follow:

"Gold is holding up well in a strong-dollar environment, supported by sovereign-debt worries," analysts including Filip Petersson at Swedish bank SEB AB’s commodity unit said in a report cited on Bloomberg. "Continued high liquidity, low interest rates, sovereign-debt and exit-strategy uncertainties as well as longer-term dollar skepticism are all likely to fuel demand and limit downside risk for gold prices."

"In the absence of fresh fundamental news flow, prices continue to take their cue from currency movements and global macro developments," analysts at Barclays Capital were quoted on MarketWatch.

"Fiscally-flavored apprehensions kept precious metals on a lively footing during the overnight hours while currency markets continued to manifest plenty of volatility," Jon Nadler, senior analyst at Kitco Metals, Inc., wrote earlier Tuesday. "Gold once again flirted with record levels in euro and British pound terms." [Read Nadler’s full commentary.]

In bullion coin news of the day relating to the United States Mint, new sales figures have been released that show 84,000 Gold Eagles shipped in February. The figure makes last month the fifth best February ever for the gold series which dates back to 1986, but the level is substantially below the same month in 2009 and 1,000 under January 2010. Also released are final silver bullion coin figures which show 2009 Silver Eagles topped 30 million in sales.

Oil and gasoline prices

Oil prices rose "getting a lift from the dollar’s loss against some trading partners and after central bank actions pointed to further strength in the global economy," wrote Laura Mandaro and Steve Gelsi on MarketWatch.

"In terms of the oil market’s internal supply and demand fundamentals, the picture remains fairly soft," Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney, said on Bloomberg. "There’s ongoing speculation that we’re going to need some firmer physical fundamental data to push oil higher."

New York crude oil for April delivery advanced 98 cents to $79.68 a barrel.

The national average for regular unleaded gasoline declined two-tenths of a cent to $2.703 a gallon, according to AAA fuel data. The current average is 4.3 cents above last week, 2.9 cents more than a month back, and 77.1 cents higher than the average from a year ago.

U.S. Stocks

U.S. stocks posted slight gains "giving up a bigger advance, as investors weighed February auto sales, some upbeat company news and signs that Greece won’t default on its debt," wrote Alexandra Twin of CNNMoney.com.

"Investors come back to the market when things start to improve," Madelynn Matlock, the Cincinnati-based manager of the Huntington International Equity Fund at Huntington Asset Advisors, which oversees $15 billion, said on Bloomberg. "The Indian economy is growing at a pretty good rate. In addition, having any sort of agreement that keeps Greece solidly in the European Union is a positive. It helps build confidence."

The Dow Jones industrial average rose 2.19 points, or 0.02 percent, to 10,405.98. The S&P 500 Index .SPX climbed 2.60 points, or 0.23 percent, to 1,118.31. The Nasdaq Composite Index advanced 7.22 points, or 0.32 percent, to 2,280.79.

Gold, Silver, and Metals: Prices and Commentary – March 2, 2010

by Jon Nadler, Kitco Metals Inc.

Drink Up!

Good Morning,

Fiscally-flavored apprehensions kept precious metals on a lively footing during the overnight hours while currency markets continued to manifest plenty of volatility. The US dollar remained strong, albeit it backed away from the 81 mark on the trade-weighted index, while gold once again flirted with record levels in euro and British pound terms. In the background, Indian physical demand remained subdued as locals were once again seen awaiting possible dips in prices.

Such dips were not visible as the New York trading session got underway this morning however. Spot gold gained $5.30 at the open, to start Tuesday’s action at $1123.30 the ounce, just shy of a six-week high near $1125.50 an ounce. Analysts at Standard Bank opine that: "[with] the gold price rising in non-dollar terms, we expect physical demand to be lackluster. We [also] expect risk appetite to decline ahead of US non-farm payrolls data on Friday. This may further aid the dollar and therefore put pressure on gold. Selling into rallies remains our preferred strategy.

Gold’s current support is at $1,112 and $1,106, while resistance at $1,124, $1,129 and the $1131.50 critical mark. The US dollar, meanwhile, was seen giving up only small portions of its overnight gains at opening time, after having pushed the euro to a fresh, ten-month low of 1.343 earlier. Oversold? Probably.

Any news to suggest a major rebound/advance in the euro is now warranted? Hardly. (aside from one, Mr. Faber, who sees the common currency reaching back to 1.40 soon). Greece is supposed to unveil a new round of austerity measures tomorrow (turning into Sparta, by the day).

Crude oil advanced 70 cents to $79.40 per barrel. Inflation remains hardly visible in Europe as well, with the annualized euro-area inflation level at only 0.9% in February. This represents a drop from the 1% rise in January, according to a flash estimate from Eurostat. Economists had anticipated a 1% rise for February.

Silver climbed 17 cents to start the session at $16.63 per ounce, while platinum rose $16 to reach $1563.00 and palladium was up $6 at $440.00 the troy ounce. No change was seen in rhodium prices — last quoted at $2430.00 an ounce. Standard Bank’s analysts currently feel that: "For PGMs, the focus is on US auto sales for January due for release tonight. Auto sales continue to recover. Platinum and palladium ETF demand remains strong."

Platinum technical support is at $1,535 and resistance at $1,560. Palladium support is at $430 and resistance at $440." At least one country seems (among those which have reported statistics thus far) to have bucked this auto sales recovery trend. German new auto sales tanked 30% in February. GM, meanwhile, is recalling more than 1 million vehicles due to power-steering problems.

Meanwhile, a threatened strike by the National Union of Mineworkers over in South Africa was called off early this morning, and Chilean metals mining firms were mostly back on their production track following the massive earthquake that shook the country on Saturday morning. Scientists say that the tremor — some 500 times the strength of the devastating Haitian quake — has shifted Earth’s axis by about 3 inches and slowed the rotation of the planet, shortening each day by 1.26 microseconds.

No seconds were wasted by Canada in many an Olympic event, to be sure, but the country also wasted no time on the economic recovery front, in Q4 of 2009. Statistics Canada reports that real GDP advanced 1.2% in Q4 2009 (5.0% annualized), marking it the largest quarterly gain since Q3 2000. The improvement in commodity exports and decline in imports added to a positive contribution from net exports. No such luck for Sweden, however. In Q4, its economy plunged back into recession as seasonally adjusted output fell 0.6%. The figures were worse than expected.

Speaking of expectations –at least those that concern gold’s near-term price prospects, Marketwatch’s Mark Hulbert finds that: "Contrarian analysis continues to suggest that gold will face stiff headwinds in coming weeks." Mr. Hulbert finds that the average gold timer is more upbeat now than he was in early February, and this, he says, "is a worrisome trend, according to contrarians, since it suggests that the gold timers are becoming more inclined to see the glass as half full rather than half empty.

"This disturbing pattern of creeping optimism is also evident in an increasing resistance on the part of the gold timers to building up cash in the face of market weakness. I noted this pattern in my column a month ago, and since then it has persisted and gotten worse."

Mr. Hulbert however, also cautions that contrarian analysis, is only a short-term market timing tool- one that "sheds little light on where the market will be in, say, one year’s time, or even in six months." True, but many seem to care about the next hour, or tomorrow, more than next week, or next January…

Keep an eye on resistance levels being (or not) overcome. Keep an eye on US stats as we get deeper into the week. Keep both eyes on Greece, and the U.K.

Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America