Precious Metals

Gold jumped up about midway through trading in the Far East and continued its rise through London and the Comex open to an intraday high just north of $955. But at around 10 a.m. in New York the yellow metal got knocked down below $950 where it stayed through the Globex close, finishing at $949.10/oz., up $11.40. Overnight, gold is little changed.

Platinum experienced a sharp sell-off late in Hong Kong, but clawed its way back to post a decent gain for the day, closing at $1181/oz., up $9. Overnight, platinum is slightly higher.

Silver made big gains through Hong Kong and early London trading that were far too substantial to get wiped out by the 10 a.m. sell-off in New York, after which it remained range-bound between $13.60 and $13.65 and closed near the middle at $13.63/oz., up 22 cents. Overnight, silver is trending lower. (Click here for charts)

Gold closed at its highest price since June 11, not surprising since the dollar took it on the chin and oil rose for the fourth day in a row.

“The weaker U.S. dollar and rising oil prices gave gold another boost,” said Barbara Lambrecht, an analyst at Commerzebank. However, “a change in sentiment could potentially trigger a sharper price correction.”

Meanwhile, Standard Bank Group technical analyst Darran Grabham said gold’s recent advance could stall as the metal meets two important resistance points.

Grabham noted that the $965.25 and $995 levels represent “resistance trendlines of short-term and medium-term consolidation phases.” Resistance levels are where sell orders tend to be clustered.

“An initial support band is situated between $937 and $932,” Grabham wrote. “Gold strength beyond $965.25 would be interpreted as positive, underpinning the market toward $983. A break above $995 would require confirmation in the form of a weekly close above $1,000.”

Currencies and Economic News

In the currency market, the dollar fell sharply against the euro. Late Monday, the euro was trading at $1.4226 vs. $1.4099 on Friday.

Equity markets set the tone in currency trading Monday, as investors showed continued appetite for stocks and higher yielding currencies than the U.S. dollar.

“While the news stream has been light, the positive start to the earnings season from both the financial and non-financial sector is helping to bolster sentiment,” wrote strategists at Brown Brothers Harriman.

And according to MarketWatch, that’s left the dollar and the Japanese yen to lose ground. Both low-yielding currencies have tended to come under pressure as equities rise. Conversely, both have tended to benefit when economic and financial fears are on the rise.

On the economic front, U.S. stocks engaged in a smallish rally Monday as Goldman Sachs forecast the biggest second-half move in stocks in more than a decade and the June index of leading indicators signaled to short-sighted investors that the economy has moved closer to a recovery.

In the wake of better-than-expected earnings reports, Goldman Sachs on Monday raised its forecast for the S&P 500, saying an improvement in earnings will drive a sharp second-half rally. Goldman raised its year-end S&P 500 target to 1060 from 940, reflecting a potential price return of about 13% from current levels.

If Goldman’s legendary market-manipulating prowess is real then maybe its forecast will prove correct. But we don’t think the S&P 500 will be anywhere near 1000 by year’s end.

Energy

In the energy market, crude oil for August delivery rose 42 cents from Friday to close at $63.98/barrel. August reformulated gasoline climbed 2 cents to finish at $1.79/gallon.

Dollar weakness and rising global equity markets buoyed sentiment among energy traders on Monday.

Even so, oil prices finished well below their intraday highs and analysts warned that the fundamentals of the oil market remain weak.

“There’s pretty much general agreement that prices are not in line with market fundamentals,” said Michael Fitzpatrick, analyst at MF Global.

“I’ve seen no consistent signs of sustainable economic growth yet and that I think that’s what is going to be required before we go much higher,” Fitzpatrick said.

Base Metals

Base metals were all up on Monday. Copper climbed 3.6 cents to close at $2.4442/lb. Nickel added more than 9 cents to finish at $7.3444/lb. Zinc gained two and a half pennies, ending at $0.7431/lb. Aluminum tacked on more almost a quarter of a cent, closing at $0.7611/lb., while lead moved to $0.7608/lb., up three-quarters of a penny from the previous session.

Bloomberg reported that copper jumped to a nine-month high on speculation that rallying equity markets signal a recovery in global growth, which will spur gains in metal use.

Copper has surged more than 74% this year as demand rose in China, the world’s largest buyer, and the U.S. housing market stabilized to some degree. Rallying equity markets signal an improved outlook for the global economy, said Lannie Cohen, the president of Capitol Commodity Services Inc.

“The economy is starting to look like it’s really gearing up,” Cohen said. “The better outlook for the economy is going to mean better demand for copper.”

Copper climbed 9.2% last week, the biggest gain since early March, on signs of improvement in the U.S. housing market. Builders are some of the largest copper consumers, using pipes and wires made from the metal.

“The latest fundamental data suggest that demand is starting to improve and that downside risks to prices from current levels are fading,” Tobias Merath, Credit Suisse Group AG’s head of commodity research in Zurich, said in a report. “The likely increase in housing construction activity and strong car sales should see demand for base metals picking up.”

Source: The Daily Resource – July 21, 2009