Gold seeks direction, may test downside
Reuters, 10.28.03, 7:04 AM ET
LONDON, Oct 28 (Reuters) - Gold faltered in Europe on Tuesday morning, having come under pressure overnight in Asia, while the market focused on the U.S. economic picture and mulled the effect on prices of New York COMEX's November option expiry.
Traders saw bullion's trumpeted assault on seven-year highs around $393 an ounce scored in September as momentarily stalled, although analysts remained broadly supportive about a further upswing, with $400 still touted as a possible target.
"I think there is a degree of pessimism building in that we haven't broken this $(3)93 level", one trader said.
Craig Ferguson, a currency strategist at ANZ Investment Bank, said there was room for a bear correction within the bullish trend.
"(We are) more confident that gold needs a retest of the $382/375 support area this week, with daily studies now suggesting three-four days of potential declines," he said in a daily report.
At 1153 GMT spot gold <XAU=> was trading at $385.40/385.45 down from $387.65/388.15 at Monday's close in New York.
"In Asia gold opened firmly but then saw decent Tocom and Aussie related selling, which kept gold under pressure for the rest of the session and into early European trading." John Reade of UBS Investment Bank said in a daily note.
The market will be watching the U.S. where Conference Board consumer confidence data for October and September durable goods orders will be released.
The Federal Reserve's interest rate setting committee meeting later in the day was also keenly awaited, more for its commentary on the U.S. economic outlook, as no rate changes were expected.
Reade said he was expecting the overall mix of data to be dollar friendly, which would put bullion under pressure. Gold tends to be inversely correlated to the strength of the U.S. currency.
The dollar <EUR=> gained ground on the euro throughout Tuesday morning. By 1115 GMT it had broken through $1.17 to the euro to trade at $1.1691.
Analysts said COMEX November option expiration, to take place after the close today, would lead to brisker trading.
"The large open interest for today's expiry is clustered at $380 and $375 rather than at higher strikes. As such, this is likely to have little effect on the spot price unless gold drops a couple of dollars..." Reade said.
One trader said the expiries were central to how gold would trade over the next couple of days.
"I think there's a lot of activity centred around $385, which is where we're likely to stay until the end of the month," he said.
Silver <XAG=> was expected to remain stable in a $5.10/5.20 consolidation range. "It continues looking on gold and base metals for further direction," said Dresdner Kleinwort Wasserstein in a report.
Spot was trading at $5.15/5.17 an ounce unchanged from New York.
Platinum <XPT=> edged up to $746.00/751.00 from $745.00/750.00.
"With speculators decent buyers of many metals, this strength looks like it can continue," Reade said, warning that speculative gains could make platinum vulnerable to a pullback.
Palladium <XPD=> was still struggling to breach resistance at $200, trading at $195.00/200.00, up slightly from $194.50/200.50.
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