Commodity Markets Analysis - Commodities Trend Sideways

By: Gold_Investments

Gold
Spot gold was trading at $673.20/673.70 an ounce as of 1215 GMT.

Gold has again traded sideways in Asian and European trading after yesterday's lacklustre trading with the U.S. markets closed for Labour Day holiday.

Gold remains near a 3 week high and just below last Friday's third highest monthly close for gold ever. Gold's consolidation in recent months after the blow off top in May 2006 bodes well for the long term health of this bull market. A very strong foundation has been put in place in recent months and in gold's "summer slow season" which will likely see gold rallying strongly into the autumn and the close of 2007.

There is a continuing misperception that if stocks go down gold will inevitably follow. Historically this has not been the case and even in the recent market turmoil gold has risen 2% in July and was up 1.3% for the month of August.

Gold is likely to decouple from stocks even more so in the coming months and its non correlation with the wider markets and safe haven qualities will again be realised. This is especially the case as physical demand internationally is very robust as seen in the recent demand figures.

Turkey climbed up to third place among global gold markets in the second quarter of 2007 by surpassing the U.S. for the first time. And uncertainly in the Middle East (as evidenced in increasing tension between the U.S. and Iran and with the British withdrawal from Basra) is contributing to this increased demand in the region. Gold demand in Turkey increased by 14 percent in Q2 compared to the same period last year, to 20.5 tons.

Gold demand in the second quarter increased by 37 percent and hit a record $14.5 billion globally. Major increases occurred in key gold markets such as China, India, Middle East and Turkey. Gold bullion bar, coin and gold jewelry sales increased to their highest level ever and broke records in India, Russia and Turkey.

Trade should pick up today with the return of market participants after the summer holidays and Labour Day break.

Silver
Spot silver is trading at $12.08/12.10 an ounce (1215 GMT).

PGMs
Platinum was trading at $1272/1276 (1215 GMT).
Spot palladium was trading at $330/334 an ounce (1215 GMT).

Forex and Gold
After modest gains yesterday, the euro is a little lower against the dollar and yen this morning but for the most part currency pairings stuck to tight ranges overnight given that yesterday was a holiday in the U.S. However, activity levels should pick up over today as this week's busy data schedule in the U.S. gets underway with this afternoon's release of the manufacturing ISM for August and construction spending for July.

Oil
Oil prices steadied above $74 on Tuesday, as traders watched a hurricane in the Gulf of Mexico and OPEC kept a lid on output ahead of its meeting next week. U.S. crude was up 10 cents at $74.14 by 0629 GMT, after trading electronically on Monday when the U.S. Labor Day holiday shut the New York trading floor. London Brent crude was down 14 cents at $73.27.

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