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Wednesday, December 8, 2010

new Precious metals dip but outlook remains bullish

Precious metals dip but outlook remains bullish ; Gold and silver prices fell on Wednesday after investors took some profits following gains over the past four weeks and a rise in US bond yields, analysts said. The US Treasury 10-year bond yield moved 15 basis points higher to 3.29 per cent, its highest level since mid-June, as investors bet on stronger US economic growth in 2011 following the Obama tax-cut extension.

Investment in gold suffers when official interest rates and bond yields rise as bullion does not provide an income. “Higher rates will weigh on gold prices,” said James Steel, analyst at HSBC in New York. “The tendency to take profits may increase as gold and other precious metals pull back,” he added. But analysts said that the outlook for precious metals remained bullish due to lack of progress resolving the euro debt crisis.

In addition, Walter de Wet, commodities analyst at Standard Bank in London, said that the physical gold market was “slowly” adjusting to higher prices ahead of the important wedding season in India and the arrival of the Chinese new year in early February. “As in the past the adjustment appears to be in progress and the physical market seems to see a “higher low” in the gold price as a buying opportunity,” he said, adding: “Put differently, the physical market needs a “higher high” to entice selling and scrap flows to the market.”

In London, spot bullion fell to an intraday low of $1,371.45 a troy ounce, down 4.2 per cent from Tuesday’s record high of $1,430.95 an ounce. Gold later pared its losses and traded at $1,382. In real terms, adjusted for inflation, gold prices remain well below the $2,300 an ounce peak set in mid-1980.

Analysts warned that the bullion market could suffer further corrections ahead of the new year as trading volumes drop in Europe and the US with the arrival of the Christmas holiday.

Spot silver prices dropped to an intraday low of $27.96 an ounce, down 8.9 per cent from Tuesday’s 30-year high of $30.68 an ounce. In late London trade, silver was quoted at $28.46 an ounce. Platinum and palladium, both used for auto-catalyst production, also fell.

Elsewhere in commodities markets on Wednesday, oil prices fell after the US Department of Energy said that inventories of petrol and middle distillates, a category that includes diesel and heating oil, rose last week more than expected.

Washington said that petrol inventories rose by a more-than-expected 3.8m barrels, while stocks of distillates, expected to decline, rose by 2.15m barrels.

Nymex January West Texas Intermediate fell 41 cents to $88.28 a barrel. In London, ICE January Brent dropped 62 cents to $90.77 a barrel. In spite of the correction, oil prices remain close to their highest levels in 26 months as crude oil demand growth accelerates this year. The International Energy Agency, the western countries’ oil watchdog, estimates that consumption will rise in 2010 by 2.3m barrels a day, the second-biggest annual rise in 30 years and only behind the 3m b/d of 2004 . articles from FT.com Read More... For the latest updates PRESS CTR + D or visit Stock Market news Today

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