Cache Metals' Bullion and Commodity Week-In-Review for�December�06 – December 10, 2010.
GOLD
Spot gold touched an all time high of $1431.60 this week as investment demand continues to be the main driver of the yellow metal. A light week for economic data saw the metal trade in a range after taking a slide Tuesday as early profit taking set in ahead of the New Year. Tuesday gold plunged from its high of $1431.60 reversing course to an intra-day low of $1371.40
"You have some very willing sellers," Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago, said and was quoted on Bloomberg. "We are coming to the end of the year, and with gold making another high, it’s a good time to take profit."
President Obama's deal with Republicans to extend tax cuts and unemployment benefits gave Americans a reason to breath easier. The millions of jobless Americans need those benefits to survive, and so does the economy. President Obama also proposed a plan to reduce the payroll tax and to revive jobless benefits for the long-term unemployed by another 13 months. This put the brakes to the sell-off of the green back. The biggest set back for the plan is that is going to add to an already astronomical national debt. The package is expected to cost $900 billion over the next 2 years. For the unemployed, including the millions of Americans whose jobless benefits run out this month, the checks will keep coming for another 13 months. This announcement has led traders to take some profit off the table after gold has made another run higher the metal has traded to a weekly low of $1371.40 before dip buying has continued to support the market.
"Positive sentiment over Bush-era tax cuts and further rounds of quantitative easing, a stronger dollar and end-of-year profit-taking have applied downside pressure on the precious complex," FastMarkets analyst Jono Remington-Hobbs said.
Thursday’s economic data saw the unemployment numbers come in lower than expected at 421,000 vs. a forecast of 426,000, a sharp contrast to the disappointing numbers that come out last week. The better than expected report failed to give the U.S. dollar a lift as it traded largely lower against all major currencies including the Euro. Good numbers like these are very bullish for the US dollar especially considering the numbers were so disappointing last week. Traders just couldn’t quite feel the love as the last weeks numbers remained fresh in their minds as what could lie ahead in the coming weeks. The yellow metal largely traded range bound seeing a low of $1380.80, before rallying on short covering to $1394.70.
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SILVER
Spot silver saw similar price action as gold after hitting a 30 year high of $30.69 in over night trading Tuesday and the metal quickly reversed course to trade to at weekly low of $27.98. In what has been a relative quiet week for economic data has left the metals market undecided and range bound as traders and investors look to square up positions with only two weeks until the end of the year. The grey metal took a big leap Monday to $30.69 as Asian, and UK buying pushed the metal higher. Profit taking quickly grabbed hold of the metal as the North American session opened up taking the metal decidedly lower to $28.47 and beyond later in the week to $27.98. The news that China may yet again raise interest rates has sparked broad based selling.
The People's Bank of China raised reserve rates by 0.5 percent, requiring banks to hold higher capital requirements; the sixth time this year and the third this month. Banks will now have to set aside 18.5 percent of their reserves as of December 20. Chinese economic data continues to surprise as the economy is on fire.
“Chinese policy makers would raise interest rates to slow inflation in the world’s fastestgrowing major economy” in a Bloomberg report published today.
Chinese authorities are seeking to cool a very hot economy and the only way to do this is to curb borrowing. This would slow, but not bring an end to the buying of commodities in China. Silver use in China as of 2009, was perhaps twice as large as had been believed earlier which is why the metal reacts to news that Chinese officials may raise interest rates. Strong investment demand continues to be the single most important aspect of the silver trade for the past year and this should keep the prices well supported going into the New Year. With the European economy teetering on the brink of collapse and the US recovery still up in the air investment demand for silver should supplant fabrication demand for months to come.
Precious metals have enjoyed a very solid run to this point with gold rising more than 30 percent and topping out currently at $1431 and silver out performing its bigger brother by rallying more than 80 percent and topping out at $30.60. Investors will most certainly continue to use precious metals to protect against a very uncertain outlook for western currencies, long-term inflation and systemic risk associated with European and U.S. debt. There is possibly more aggressive QE2 implementation in the works as unemployment figures continue to disappoint and with Americans still out of work consumer confidence remains low despite the holiday season. Now is the time to protect those assets with precious metals. The best is yet to come for the yellow and silver metal.
GOLD Support��� $1353/$1370
SILVER Support� $28.00/$27.85
GOLD Resistance $1405/$1415
SILVER Resistance $29.00/29.32
Weekly Close for Gold
November�26 - $1405��December�03 - $1384
Weekly Close for Silver
November�26 - $29.24���� December�03 - $28.58
Weekly Close for Platinum
November�26 - $1697����� December�03 - $1674
Weekly Close for Palladium
November�26 - $762������ December�03 - $740
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Trading Department - Cache Metals Inc.
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