Precious Metals

Gold pushed slightly higher in Hong Kong on Monday, but there was little further action until early in the second hour of New York trading, when the metal suddenly went vertical, busting through the $900 barrier, adding $15 in less than a half-hour and topping out at $907, but that was it for the day, as it eased through the rest of the Comex and the Globex, to finish at $903.20/oz., up $17.40. Overnight, gold is slightly lower.

Platinum got the same morning ignition, but it rode the updraught all the way through the day, barely coming off its intraday highs late in the Globex to end at $1118, up $29. Overnight, platinum is trending higher.

Silver blasted off at the same time, as well, and it continued to push higher through the Comex, peaking at $13.14 before falling off modestly on the Globex and closing at $13.03/oz., up 53 cents. Overnight, silver has been flat. (Click here for charts)

The precious metals began the new week in banner fashion, with all of them crashing through key levels, gold breaching $900, platinum pushing past $1100, and silver edging over $13.

The usual suspects probably played their part, with oil rising again and the dollar getting slapped down.

“Gold is being influenced interchangeably by the dollar and equities,” Yide Futures Brokerage Co. analyst Yang Zhenqiang said. “It’s still trading within a tight, narrow range and may take both dollar and equity weakness to drive it over $900.”

But, as Bloomberg pointed out, of potentially greater influence is the upcoming release of bank stress tests, for which traders may be positioning themselves.

“The tests may signal whether 19 top financial firms need more capital to withstand economic disruptions. The Federal Reserve plans to make the data public on May 7, the same day as a possible interest-rate move by the European Central Bank. Some investors buy precious metals as a haven from economic turmoil,” Bloomberg wrote.

Bayram Dincer, a Dresdner Bank commodity analyst in Zurich, is convinced. “This week’s ECB interest-rate decision and U.S. bank stress-test results will dominate the action in the gold price,” he said. “Gold will retest $910 an ounce resistance and surpass it. Gold fundamentals are still well intact and are expected to become more price-supportive in the near term.”

Adding to the mix, China may well be buying more gold for its reserves, after revealing recently that it privately increased holdings by three-quarters over the past six years.

Trading in Asia, while limited by a holiday in Japan, “saw gold move sharply higher on reports of Chinese buying from the Shanghai Gold Exchange,” wrote John Reade, of UBS London.