Precious metals dropped sharply across the board when trading resumed yesterday via electronic trading. Gold traded down to support at $1,183.00, while silver matched Friday’s low at $16.65. Platinum fell to $1,186.50 and for a brief time was trading flat to gold, while palladium recorded a low of $735.00. This morning finds all four metals have done a reversal and are trading above their Friday settlement prices as good physical demand and short covering were seen in Europe and continue to be seen in early U.S. trading.
The most recent CFTC data showed that long positions have continued to be liquidated while short positions continue to increase, which raises the likelihood of a short covering rally. On the technical side, gold is likely to face resistance at $1,200.00, but a break above sets the stage for a test of the 10-day moving average at $1,212.00, which should prove to be very interesting as a break above this level should get the shorts very nervous. Silver, which has fallen more than gold as witnessed by the gold / silver ratio breaking above 70, could get the shorts concerned with a settlement above $17.00, but at the very least silver will have to break above the 10-day average currently at $17.35 before any sizable short holders begin to think about covering their position.
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