PMs Steady, Watch Euro
GoldMoney News Desk | Feb 27, 2015 06:44AM ET
It was no surprise that Ms Yellen hinted at caution over interest rates due to external events, such as the outlook for the Eurozone and uncertainty over China, but overall she was careful to be non-committal.
Following her testimony, an easing dollar provided support for precious metals with gold having tested the $1190 level twice, last Friday and Tuesday, forming a short-term double bottom. This indicates good technical support in the short-term at least. Silver followed this same pattern finding similar support at $16.00. Precious-metal prices improved yesterday as the dollar rallied on some bear-closing and notable weakness in the euro. The result is gold and silver rose marginally on the week by early London trading this morning.
The chart below shows gold and its Open Interest on Comex.
Open interest improved this week, giving advance warning that buyers are beginning to accumulate gold contracts on dips. We saw a repetitive pattern of physical buying overnight in Asia and on the London opening, followed by futures selling during US trading hours. What is interesting is that the passing of the Chinese New Year was expected to reduce physical demand. Instead, bullion demand appears to have picked up, probably reflecting Russian and other central bank buying. Russia withdrew from the market in January, apparently unprepared to chase higher prices, which suggests that their strategy is to accumulate on dips.
The stubbornly high level of Open Interest in silver has at last reduced somewhat as shown in our second chart.
Some of the shorts have managed to reduce their exposure. However, intraday trading this week was still consistent with remaining short positions being squeezed.
Our last chart shows the performance of platinum and palladium so far this year. Palladium has been the better performer thanks to a strong rally this week. Could this be an indictation of things to come for gold and silver as well?
Get The News You Want
There was no report from the Shanghai Gold Exchange this morning, due to the Chinese New Year.
The euro
The euro's future could become an important factor. In today's analysis I point out that the euro's inherent weaknesses may undermine its credibility in coming months. This will have two effects: firstly, and most obviously, it increases economic and systemic risks for the Eurozone and therefore the rest of the world; and secondly, it is likely to lead to a new source of demand for physical gold. It is easy to forget that Europeans have a long history of being avid gold hoarders in troubled times.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.