Gold Spot gold was trading at $667.30/667.80 an ounce as of 1215 GMT.
Gold rallied 1.6% last week and has traded sideways in Asia and early European trading. Further weakness in the USD against GBP and the EUR will likely be supportive of gold (see FX Commentary below).
There may be some consolidation after gold's weekly close above previous resistance at $660. Gold may now challenge the next level of resistance at $675. Strong support is seen at $640.
With the UK out for a public holiday conditions are likely to be thinner than usual today.
Silver Spot silver is trading at $11.95/11.97 an ounce (1215 GMT).
PGMs Platinum was trading at $1245/1250 (1215 GMT). Spot palladium was trading at $326/332 an ounce (1215 GMT).
Oil Light, sweet crude for October delivery fell 8 cents to US$71.01 a barrel on the New York Mercantile Exchange by noon in Europe in electronic trading. Last week the October oil contract rose $1.26, or 1.8 percent, to $71.09 a barrel on Aug. 24, the biggest one-day gain in almost a month.
The Financial Times reports that Saudi Arabia has begun setting up a 35,000-strong security force to protect its oil infrastructure from potential attacks. The FT says the move underlines the kingdom's growing concern about its oil installations after threats from al-Qaeda to attack facilities in the Gulf, as well as rising tensions between Iran and the US. The force already numbers about 5,000 personnel, a Saudi adviser said on Sunday. They are being trained in the use of new surveillance equipment, countermeasures and crisis management under a programme managed by US defence group, Lockheed Martin, according to the Middle East Economic Survey in Nicosia.
Currencies, the USD and Gold Recent strength in the USD is likely to be short lived which will lead to buying of gold.
The Commitment of Traders (COT) report suggests that the USD rallied recently due largely to massive short covering when the USD did not break down below 80 on the USD Index. There has not been a sizeable increase in USD longs and given the increasing deterioration in the US housing and mortgage market and the likelihood of an interest cut in September, the USD will likely resume its downtrend in the coming weeks which will be supportive of gold.
According to a panel of US business economists, the risk of massive defaults on sub-prime mortgages and heavy debts now pose a bigger threat to US economic prosperity than terrorism. The National Association for Business Economics said the home loans crisis had supplanted terrorism and the Middle East as the biggest short-term threat to the US economy. Over 250 of the economists were surveyed with 18% saying the sub-prime situation was their biggest concern at present.
There is also little on the data front apart from US existing home sales and comments from the ECB’s Trichet. The markets will be looking for any clues as to his thoughts ahead of next week’s policy meeting. On Friday ECB “sources” said a September rate hike depended on a return to more normal trading conditions and that the recent statement referencing the August policy meeting was not a signal for policy tightening.
While markets remain hostage to developments in equity and credit markets, forex and gold traders are likely to concentrate more on fundamentals over the course of the week with a host of key data due for release.
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