Key Notes: China’s industrial production for August surged 13.9%, greater than the median of analysts’ expectations. This tempered concerns about the global economic recovery. Equity and commodity markets rallied and gold was temporarily left by the sidelines. On an intra-day basis, gold hit a low $1240.95 before paring losses to end the day flat.
Gold was maintained above the $1240 key support level despite positive sentiments in the market that reduce safe haven flows. Gold bulls will be heartened by bullion’s ability to hold firm amidst greater risk appetite. Clearly, investors are not ready to abandon gold entirely for other riskier assets. As such, we anticipate that gold may attempt to penetrate the $1250 resistance level on an intra-day basis.
Support for gold: $1240
Market Summary
Precious Metals: Gold ended flat on Monday as a positive economic data from China boosted optimism about the recovery, reducing safe haven flows into bullion. Silver rallied to the highest level since early 2008, above $20 an ounce. This could be attributed to its industrial uses and silver rose alongside the Platinum Group Metals. Since Aug 24, the price of silver has increased about 14%, outperforming gold’s 3$ rise during the same period.
Crude Oil: Crude oil rose nearly 1% on Monday, boosted by an extended shutdown of a major Canada-U.S. crude pipe line and strong Chinese industrial output. Crude oil rallied to an intra-day high of $78.04 before paring gains. Based on Reuters poll of analysts, total U.S. crude inventories probably fell by 2.3 million barrels last week. The Industry Group American Petroleum Institute will issue its inventory report for the week to Sept 10 on Tuesday at 2030 GMT.
Currencies: The U.S. dollar weakened against the euro, falling the most in two months as strong Chinese economic data encouraged investors to pile into riskier currencies. The euro was also boosted after the European Commission said it expects the Eurozone economy to grow almost twice as fast in 2010 as previously expected. The Aussie reached a five month peak of $0.9362 as Australia is a top supplier of raw materials for China.
Indices: U.S. stocks climbed after China’s industrial output surged and banks were given as much as eight years to meet capital requirements. Measures of financial, technology and raw-materials companies climbed more than 1.5%. Benchmark U.S. indexes extended gains after Bloomberg News reported Microsoft Corp. is planning to sell debt to pay for dividends and buybacks, sending shares of the world’s largest software company up 5.3% for their biggest gain since October.
