PRECIOUS METALS - European Opening View - Precious metals track commodities lower; SPDR holdings decline 4.2-tonnes
2012-07-12 00:00 Foshan Kejinda Stainless Steel Trading Co.Ltd
Metals and broad commodity sentiment weakened Tuesday as the dollar firmed and Norwegian oil workers halted their strike action; commodity markets were also knocked by yet another scandal as Iowabased broker Peregrine Financial Group filed for Chapter 7 bankruptcy following claims of defrauding clients.
The precious metals gained initially as the euro rallied on news Eurozone leaders had agreed to release €30bn in financial aid to bolsterSpain’s troubled lenders – the complex was up 0.75% by theUSopening. However, the rally stalled amid concerns German lawmaker could block the formation of the European Stability Mechanism leading the complex to finish the floor session down 1.1% and trading down as much as 1.6% in after-market trade. The CRB Index closed down 1.4% and WTI crude 2.4%. EUR/USD finished the day down 0.5% and EUR/JPY 0.7%. Similar losses were seen in US equity markets as the Dow settled down 0.6% and the S&P500 0.8%; in contrast European indices had closed broadly upbeat with the Stoxx 50 Index closing up 0.8%.
Lacklustre equity sentiment has been seen overnight with the Nikkei currently off 0.1% and the MSCI Asia Pacific Index 0.3%. The main currency pairs have seen a muted start with the euro little changed against the dollar and yen; AUD/USD is up 0.4%. OvernightChina’s Premier Wen Jiabao has said that promoting investment growth was now crucial to stabilizing the nation’s economic expansion; given the recent declining inflation indicators this could give the Peoples bank further scope to ease its monetary policy.
Data has shown a slight 0.7% improvement in Japanese Tertiary Industry Activity; Australian Westpac Consumer Sentiment improved from 0.3% to 3.7% while Home Loans contracted -1.2%. The line-up for the rest of the day includes German CPI, US Trade Balance, Wholesale and Oil Inventories. BothGermanyand theUSare due to auction 10-year bonds while the Fed will publish the minutes of its last FOMC meeting.
Bargain hunting has lent some support to the precious metals this morning with the complex currently up a net 0.4%. While the metals appear comfortable within their recent trading ranges the complex does appear vulnerable to pressure in the short-term given the increasingly mixed economic indicators and absence of clear indicators on Fed monetary policy. Gold remains overshadowed by trend-line resistance at $1596/1616 and given the 4.2-tonne redemptions from the SPDR ETF yesterday could signal a re-test of support at $1550; similarly silver appears vulnerable to a test of crucial support at $26.06.