Gold and Silver Respond to Positive Market Sentiment

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After breaking a three day of losing streak, gold prices traded higher on Monday after an above forecast jobs report in the US decreased the odds of potential monetary easing any time soon and which could be the reason for gold trading sideways.

The euro was trading at a slightly lower note against the dollar but seemed to be picking up momentum in the Asian trading session and is expected to remain buoyed after the German Chancellor supported the ECB’s bond buying following a clash with the German Central Bank.

Looking forward, it is again expected to be a quiet day absence of any such major economic releases from the globe except Germany’s factory order which is expected to fall. This may keep the shared currency under slight pressure but as discussed above, the euro may recover as the day progress. There is more reason for the euro to stay strong as the Greece Prime Minister is ready to meet coalition leaders later today to discuss about the budget saving package and state asset sales after the “Troika meet” sound productive yesterday.

Meanwhile, the world’s largest exchange-traded fund, SPDR Gold Trust reported inflows of 3 metric tons as of Friday. The fund had experienced drop in tonnage, but on Friday had 1,255 metric tons held in trust, up from 1,249 the prior week. Investment demand is therefore creeping up slowly.  

Silver prices have also poised a bit at the early trading but are expected to pare the losses as the day progress.

With Germany backing the ECB to purchase periphery bonds and with “Troika” support for Greece the day is expected to be fairly quiet with little eco data and little news. Spain is the only stumbling block.

Germany factory orders expected to projected to stay weak. Silver may revive with support from the equities.

This morning base metals are trading down by 0.1 to 0.45 percent at LME electronic platform after recovering yesterday. Presently, the metals pack has mostly remain subdued due to lack of action from the global leaders.

Even the Spanish and Italian yields have started to fall supporting the shared currency the euro and may continue to provide optimism among market participants. As at one hand, investor’s are eying the development of the Euro-zone the Chinese stagnant property prices and key release scheduled later during the week might continue to provide thin participation and may restrict much upside.

Even the IMF has forecasted a subdued year of performance for industrial metals and may continue to support downside. Further, the Chinese export taxes have been revised and this may provide opportunity for the Chinese smelters to export base metals to LME at a comparatively higher profits and this may also disappoint LME metal forwards as China remains the largest producer and consumer of industrial metals. From the economic data front, the UK industrial and manufacturing production is likely to remain weak in the month of June and may continue to weaken base metals

Weak economic releases and cautious trading ahead of key Chinese releases might continue to weigh on gains.

 Overall, base metals, precious metals and industrial metals may remain weak until the Chinese data is released on Thursday and Friday. Also rumors of monetary easing from the PBoC could bolster the metals family.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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