London, 30 December 2009 - Base and precious metal prices marched to two different tunes yesterday in what was relatively thin pre-year end trade. Gold and the precious sector struggled for traction all day and eventually slipped lower during US trade as the dollar recovered lost ground in reaction to positive economic data.
The base metals meanwhile opened up from their Christmas Eve closes and remained bid across the rest of the day on a combination of strike concerns, improving US economic indicators and year-end window dressing. Indeed by the close of play copper had hit its best since September last year, trading above $7,300, and triggered similar gains across the rest of the metals with zinc hitting a 16-month high, tin a 15-month high and nickel a 2-month high. Even aluminium, which had begun the day in negative territory, turned higher as the day progressed to close up $18.
In other market the Yen remained under pressure across the day, eventually dipping to a 2-month low below 92 against the dollar.
Meanwhile the Euro was initially bid against the greenback, rising to 1.4457, before correcting in US trade as the US Consumer Confidence reading for December came in inline with expectations at 52.9. The Dollar Index closed up 0.2% but below chart resistance at 78.4. US equities were initially upbeat in reaction to the data but turned lower heading into the close as year-end profit taking emerged.
Economic data today will show Chicago PMI while oil traders will be looking to the US Inventory reading following last weeks surprise drawdown and recent cold snaps in Europe and North America.
Again we would look for gold and the rest of the precious metals to track the movements of the dollar with rallies for the time being likely to run into further pockets of long liquidation.
Further chart support in gold is expected back towards $1080 however given the recovery in the dollar amidst rate expectations we would not rule out a deeper pull-back to the $1050 level.
Silver will look to gold for direction although chart support is anticipated around recent lows of $16.90/16.76.
Despite the risk of pressure on the PGMs in the short-term expectation physically backed ETF products could soon be listed in the US should limit substantial price weakness as both investors and end-users look for dip buying opportunities.
