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A.M. Kitco Metals Roundup: Greece Concerns Help Propel Gold, Silver Higher

(Kitco News) - Comex gold futures are climbing for the third session in a row Tuesday, as Euro-zone sovereign debt worries have taken center stage once again. On Monday, Standard & Poor's cut Greece's credit rating and investors worry that the government will be unable to meet current refinancing needs with its current bailout package.

These worries have supported both gold and silver as the precious metals arena builds solid footing after last week's sharp price pullback. Metals traders will be watching currency movements and euro-zone related headlines closely Tuesday for direction. Traders are favoring risk aversion plays, which is bullish for the gold and the U.S. dollar in the short-term, following last week's wave of commodity liquidation.

June Comex gold last traded up $10.60 at $1,513.80 an ounce. Spot gold last traded up $1.70 at $1,514.20.

The euro/dollar is modestly weaker in early trading Tuesday, as the currency remains under pressure amid on-going concerns regarding Greek and Portugal debt issues. The euro has seen a steep plunge versus the dollar over the last four sessions, falling from $1.4900 to Tuesday's low at $1.4270.

The U.S. dollar index has built a minor short-term bottom on the daily chart, but would need to rally through the 75.81 area (April 18 swing high) to turn the medium term trend bullish.

Nymex July crude oil futures are modestly lower following Monday's strong rally. Oil traders remain on edge following news that the CME Group raised Nymex trading margins for West Texas Intermediate and Brent crude oil contracts. Similar news last week helped trigger a sharp sell-off in the silver market.

Also, in the news, investment bank HSBC bumped up its price forecasts for gold and silver this year and next. The firm increased its 2011 average price for gold to $1,525 a troy ounce from a previously forecasted $1,450 an ounce. For 2012, the gold estimate was increased to $1,500, from $1,300.

For silver, HSBC expects the metal to average $34 an ounce this year, versus a previous estimate at $26. Looking ahead to 2012, the bank expects silver to average $29 per ounce versus the prior estimate of $20 an ounce.

The May 10 London a.m. gold fix stood at $1517.25 versus the previous p.m. fix at $1502.00.

On the U.S. economic calendar Tuesday, several minor reports are due for release, including the Johnson Redbook retail sales index, the wholesale trade inventories data and the weekly American Petroleum Institute figures. Also, U.S. Treasury Secretary Geithner is addressing the U.S.-China Strategic and Economic Dialogue meeting in Washington D.C.

However, metals traders are awaiting Wednesday's release of the Chinese inflation and industrial production figures.

Technically, the June Comex has built important near term technical support at the May 5 daily low at $1,462.50. That is the major level for traders to monitor on the downside near term. If that floor were to give way, it would open the door for a fresh wave of selling action. On the upside, the market remains within the large range day seen on May 5. Although prices have been gaining, the market needs to take out initial resistance at the May 5 high at $1,522.10 to target a move back toward the $1,550 area.

July Comex silver is higher for the second session in a row, as that market continues to recover from last week's massive price plunge. Major near term support is seen at the $33.61/33.03 zone. Near term resistance lies at $39.56 and then $40.60.

The longer-term uptrend remains solidly intact for both gold and silver. Silver saw a more severe setback last week, which leaves more work on the upside needed to repair the medium term trend. Given last week's volatility, a period of consolidation within the late April/early May price ranges may be needed near term, as the market continues to recover and build a stronger base.

By Kitco News;reporters@kitco.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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