Commodity Markets Update - Gold Trades Sideways Near 16 Month Highs

By: Gold_Investments

Gold
Spot gold was trading at $705.20/705.70 an ounce as of 1215 GMT. It has traded sideways in Asia and Europe but remains close to 16 month highs. Yesterday's close above $700 was only the 7th daily close above $700 in 26 years.

Geopolitical risk, the reemergence of an Osama Bin Laden video and jitters on the September 11th anniversary should provide safe haven support and bids to gold. As will oil prices which are up again and a fraction off all time record highs and the USD which is still under serious pressure and was trading below near record lows of EUR1.382. There are expectations that the Fed will cut by 0.5% and this will lead to further selling of the USD.

Today's news regarding further declining gold supply in the world's largest gold producer, South Africa, is also likely to keep prices elevated over the medium to long term. Gold output in SA fell 5.2% year on year in July. China is now the only large gold producer that has managed to increase supply in the last year despite robust gold prices. "Peak oil" has entered the modern world's investment lexicon and it is likely that "peak gold" may also do so in the coming months and years.

A further decline in the global gold hedge book was seen in yesterday's news that Newcrest, Australia's biggest gold producer, had recently closed out hedges or bought back short positions of 2.3 million ounces. Newcrest plan to buy an additional 1.70 million ounces in the coming year. It would appear that Newcrest are not expecting gold prices to fall anytime soon and indeed it is an indication that they expect prices to continue rising.

Silver
Spot silver is trading at $12.57/12.59 an ounce (1215 GMT).

PGMs
Platinum was trading at $1289/1294 (1215 GMT).
Spot palladium was trading at $332/338 an ounce (1215 GMT).

Oil
Crude oil prices on Tuesday jumped above $78 a barrel this morning. Prices rose to $78.57 a barrel in New York, just below the all-time high of $78.77 a barrel reached in early August.

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