Gold lower in early London trade, may see short-term weakness

London (Platts)--16May2006

Gold was marked lower in early London trade Tuesday as the market's
weakness continued following the previous day's sharp sell-off, but analysts
remained positive over the market's longer-term prospects.
Spot bullion was indicated at $677.00-679.00/oz at 0815 GMT, down from
Monday's afternoon London fix at $687.50/oz but in line with overnight trading
levels in Asia.
With the market in the throes of a long-awaited correction, there could
be further scope on the downside in the near term, suggested James Moore,
analyst at thebulliondesk.com.
"While gold remains firmly locked in its bull trend long-term I think the
current correction still has more room to run," Moore said. "On the charts
gold has room back to $670-2 to stay in its current up channel, however a
break below is likely to trigger a bigger correction back to the previous
channel around $580-620."
While the current correction could extend further, however, "the
longer-term outlook remains positive on unchanged strong fundamentals in the
long run as opposed to short term speculative implications in the near term,"
Standard Bank London said in its daily web site report.
Having hit a succession of new 25-year highs before peaking at $730.00/oz
on May 12, gold had looked "overextended" prior to the sell off, Standard
said.
On the downside, "gold could likely find some scaled-down support from $665 to
$650, as it consolidates to build a base for new attempts to rally back
higher," it added.
Gold prices have also been hit by a recovery in the US dollar and a slump
in the price of oil, with both trends remaining in place Tuesday.
The euro was bid at $1.2812 at 0815 GMT, up marginally from the previous
closing level of $1.2795 but well down on Monday's intraday high of $1.2971.
Meanwhile, front-month Brent crude oil futures for June delivery on
London's Intercontinental Exchange fell sharply in afternoon Asian trade
Tuesday, extending the $2.65/barrel collapse on Monday amid a broad-based
sell-off.
Both a rebound in the dollar and a weak chart picture acted as a catalyst
for long liquidation, as concerns over the general economy were the main
factor causing the recent collapse in oil prices, sources said. "General
sentiment, I think, a slide in most financial markets and people are suddenly
risk-adverse," a market source said.
"Speculative length in oil remains high and consequently the market is
still vulnerable to long liquidation though we see downside risk as limited to
$67-68/barrel," a Barclays report said.

For similar stories, take a trial to Platts Metals Week at
http://www.platts.com/Request%20More%20Information/


 

Copyright © 2005 - Platts

Please visit:  www.platts.com

Their coverage of energy matters is extensive!!.