Gold, Silver Surged Higher On Euro Zone Worries, Crude Rally


Comex gold futures climbed higher for a second session in a row Monday, as a sharp rally in the crude oil market reignited concerns about inflation, which in turn supported gold. July Nymex crude oil futures surged back above the $100 per barrel level, hitting $1.0282 in afternoon action.

Renewed euro-zone debt concerns also helped lift gold to firmer levels Monday. Gold continued to strengthen following morning news that Standard & Poor's downgraded Greece's credit rating. The ratings agency cut the country's long-term credit rating amid worries euro-zone officials may extend Greece's debt payment maturities on their portion of the bail-out.

June Comex gold settled at $1,503.20 an ounce, up $11.60. Spot gold last traded up $12.30 at $1,506.90.

Early weakness in the U.S. dollar index was also bullish for the yellow metal. The greenback edged higher in early afternoon action, but then slid back to negative territory.

The London p.m. gold fix stood at $1502.00, versus the previous p.m. fix at $1,486.50.

On the charts, the June gold contract shrugged off last week's losses, leaving the May 5 low at $1,462.50 as the major support level to monitor on the downside. Near term resistance lies at $1,522.10.

July silver futures reversed its five-session losing streak to end higher Monday. The contract closed up 1.829 at $37.116 per ounce.

Silver's losses last week were much more severe than gold's and the market snapped back sharply higher Monday, reacting to the oversold conditions. Silver plunged 29.8% last week, according to a May 9 research note from R.J. O'Brien.

Looking ahead, "rallies in silver now will continue to bring out scale up selling whenever it is judged the market is too long and too vulnerable. Most traders think $37 to $38 per oz basis spot is very much a top for silver in the present circumstances," R.J. O'Brien analysts wrote.

On the charts, major near term support for July silver lies at $33.615/33.035. If that level were to fall, a fresh selling wave of action would be seen.

July N.Y. copper closed up 4.10 cents at $4.0165 a pound Monday.

Chinese buyers, eager to take advantage of last week's push to a five-month low in copper prices, were in the physical market overnight, which in turn helped to push copper prices higher on Monday.

Also, bargain hunting was seen amid softness in the U.S. dollar.

LME copper warehouse stocks gained 1,425 metric tons to 468,000 metric tons, the exchange said.

Looking at last week's action, R.J. O'Brien analysts wrote in a May 9 research note to clients "The ferocity of the selloff in copper and the other base metals last week surprised many observers. Copper fell to a five month low and the technical damage done is such that rallies are likely to be increasingly sold into by technical funds and CTAs. The more extreme the volatility becomes the more likely it is that semi-fabricators will become even more cautious and stick strictly to hand to mouth buying. So all in all, the short term outlook for copper is not bullish.

Technically, the July copper contract remains in an intermediate term downtrend, with a series of lower lows and lower highs seen on the daily chart off the mid February peak. The market is currently testing 200-day moving average support, seen at $3.9979. That level and the May 6 low at $3.9280 are the key short-term support levels for traders to monitor.

Near term resistance lies at $4.0950-$4.1420. The market would need to scale that resistance zone to shift the near term bias from bearish to bullish.

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