-- Jun Gold Vaults $360 Resistance, Hits 14-Week Highs
-- Dollar Fall, Equity Mkt Slide Spurring Buyers
-- Next Targets Seen As $370, $380
-- Jly Silver Slightly Higher In Tow, But Still Shy Of $4.90 Resistance
-- Platinum, Palladium Higher Too, But Holding Recent Ranges
By Gavin Maguire
New York, May 19 (OsterDowJones) - Comex Jun gold futures on the Commodity
Exchange division of the New York Mercantile Exchange settled $9.50, or 2.7%,
higher Monday at $364.40 per ounce and 14-week highs after good levels of
speculative buying.
Pronounced weakness in the U.S. dollar as well as the downturn seen across
the equity markets were deemed the major drivers behind the gains. The recent
increase in terrorist attacks in the Middle East as well as long-term bearish
forecasts for the U.S. dollar also enticed buyers.
U.S. Treasury Secretary John Snow's comments over the weekend that the
value of the U.S. dollar was best determined by the marketplace and that the
U.S. government was not particularly concerned about the decline of the dollar
were read by many foreign exchange market observers as signaling an official
ditching of the U.S. strong dollar policy.
This in turn placed additional strategic pressure on the U.S. dollar
overnight, while at the same time sparked gains in the dollar's alternatives.
During the day, the euro regained for the first time the level at which it
was launched - $1.17 - while against the yen the dollar plumbed lows not seen
since early 2001.
At the same time, gold's surpassing of established resistance around $360
drew fresh interest from chart-based funds and ensured that much of the
traffic was one-way through the session.
That said, spurts of profit taking from the brokerage community were noted
periodically to temper the ascent. But on the whole sellers were content to
camp on the sidelines and allow prices to continue their ascent.
Leonard Kaplan, president of Prospector Asset Management, noted: "It was
all dollar-related fund buying today. There really was very little movement
from the commercials as the funds just dominated.
"Of course there was some profit taking coming through, but really the
funds controlled the show," he said.
Kaplan and other sources said that now that prices on the futures and spot
market overcame the $360 level, fresh fund buying interest would likely emerge
that would target the $370 area initially and then the $380 mark.
But, further profit taking is expected along the way, particularly since
momentum indicators such as the 14-day Relative Strength Index have ventured
deep into overbought territory.
Any pullbacks resulting from profit taking are expected to find support
around $360 initially and then around $357 and $355.
Spot gold also pressed through the resistance around $360 to fresh four-
month highs of $364.90 on the same buying as seen in gold futures.
Sources agreed that the firm close would likely entice follow-through
interest that may draw additional upside targets such as the $370, $375 and
$380 levels.
However, some consolidation of the recent gains and healthy doses of
profit taking are also deemed on the agenda, so that immediate progress may be
stuttered.
Support is seen around $375, $355 and $350.
Jly silver was 3 cents higher at $4.82 on gold's coattails. Resistance
around $4.90-$4.91 is expected to remain a tough obstacle to overcome while
clouds linger over silver's industrial demand prospects.
However, should gold continue to draw fresh buyers, silver is expected
to benefit and is seen targeting the $4.95 level and then $5.00 once the $4.90-
$4.91 resistance zone is overcome.
Nymex Jly platinum gained $6.10 to $652 on the back of gold's impressive
gains. However, gold's progress served more to quell selling interest than
spur rounds of fresh buying, and as a result prices failed to reach recent
highs in the $658-$659 region.
Regardless, gold's solidity is expected to continue lending platinum
support. A $640-$660 range is expected to continue prevailing over the coming
days.
Over the longer run, a $630-$670 range is seen being forged.
Jun palladium also made gains, settling at $165.70 on the back of a $5.85
rise.
As with platinum, further strength elsewhere in the precious metals
complex is expected to at least support palladium.
But, a gloomy industrial demand outlook is expected to limit overall
upside momentum.
Settlements:
London PM Gold Fix: $359.00, $355.00 Friday
U.S. spot gold 1343 ET: $364.85, up $5.90 from Open; Range: $357.10-364.90
Jun gold (RGCM03) $364.40, up $9.50; Range: 357.30-365.00
Jly silver (RSIN03) $4.820, up $0.030; Range: $4.800-$4.860
Jly platinum (RPLN03) $652.00, up $6.10; Range: $648.50-656.00
Jun palladium (RPAM03) $165.70, up $5.85; Range: $160.00-166.80