WHY GOLD? WHY NOW?
The recent resurgence in the price of Platinum is attributed to aggressive buying by car manufacturers trying to stay ahead of the curve. Meaning they anticipate higher commodity prices this year.
If you remember just a few months ago, we were talking about some of the Wall Street traders playing the Platinum / Palladium arb (Buying Palladium and selling Platinum). That’s when the price of Palladium was setting an all-time high and the Platinum market was struggling to stay afloat. That strategy was abandoned as soon as the hedge funds started to head for the exits when the Palladium sell off occurred. One can imagine once the word on the street got out that car companies were back in the PGM market, speculators would join in “fueling” the rally in this market.
Well things have changed and the price of both metals have been in rally mode. Now the price of Platinum is in hot pursuit of reaching the level of Palladium and possibly overtaking it at some point in the near future.
The price of Gold continues its march higher as strong spec buying is reported out of the Far East overnight. Softer U.S. Ten-Year Treasury yields helping to keep the buyers interested.
If this rally in the Gold market continues, the levels of resistance the Wall Street traders are focusing are $1,366 and $1,375. According to my technical program, a trader breakout above the $1,375 level and strong spec buying could emerge bringing the price of Gold ever closer to the $1,400 dollar level, but a stronger dollar and higher treasury yields will derail any chance of reaching that goal.
Precious metals prices rebounded Wednesday after the CPI number was released. What was so interesting, was the initial reaction right after the number when the equity markets had a three hundred point drop and the price of gold dropped over ten dollars. Rising yields, especially on the U.S. Ten-Year treasury, should take away an appetite for Gold because precious metal investments do not bear a yield. Within a short period of time after the number the value of the U.S. Dollar started to decline and a total reversal became evident as program trading took over in the Gold market sending the price of Gold up to a three week high.