Money and Metals

The gold market is facing some short term challenges. "Gold futures edged higher Wednesday afternoon, as a fall to a three-week low under $550 an ounce sparked renewed physical and investment demand. 'We are undergoing a healthy bull market consolidation, with the likelihood there may be more pain to the downside,' said Peter Spina. 'Should the $540-$545 spot support give way, we should then look for the next strong technical pullback target around $525,' he said."

"Gold for April delivery touched a low of $548.50 an ounce on the New York Mercantile Exchange, a level not seen since Jan. 18. It recently recovered a bit to trade up 50 cents at $555.30. On Tuesday, the contract lost almost $20 an ounce to record its biggest ever one-day decline."

"Traders said the steep fall suggested that the rush of buying that has propelled prices to repeated 25-year highs may have been exhausted, at least for now. Action Economics said a sharp yen rally had added to the momentum as it squeezed out Japanese and other yen-funded margin accounts from long gold positions."

"'The weakness in gold prices is reflective of a broader deleveraging of commodity long exposures,' they said. 'The sharp decline in gold has weakened the technical picture and should keep prices pressured over the near term.'"

"Many analysts are expecting gold to test the $600 an ounce resistance level in the near term. 'From a technical point of view, the current correction is positive for the longer-term bull run and should give the metal the legs to clear the current 25-year high ... and push on towards $600,' said James Moore. Prices will likely see support around the $545-$535 level, he said."

"Former Federal Reserve Chairman Alan Greenspan said on Tuesday that the high price of gold is due to investor concern about major geopolitical conflict. Greenspan, who spoke to an audience of international investors in Tokyo via video link from his apartment in New York, also said cheap oil prices were a thing of the past due to a lack of oil refining capacity."

"Greenspan, who said high gold prices did not reflect inflation or the strength in commodities, added the low probability of a nuclear weapon being detonated within five years would not necessarily stave off a spike in gold prices."

"Other metals traded mainly higher Wednesday. March silver was last trading up 2.5 cents at $9.435 an ounce. A correction back to 'the prior breakout point' of $9.25-$9.30 for silver will 'lend the first level of support here with $9 the next downside target,' said Spina."

"April Platinum was down $1.70 at $1,060 an ounce but sister metal palladium saw its March contract tacked on $1.80 at $291 an ounce after losing 7.5% in the previous session. Over in the equity market, metals-mining indexes traded slightly higher on the heels of hefty losses of over 6% on Tuesday. The benchmarks closed out Tuesday's session around their lowest level in two weeks. 'Metal equities took a thrashing and it appears there may be more weakness in the short term here,' said Spina."